A few years ago, central banks saw Bitcoin and other cryptocurrencies as a harmless, little bubble that posed scant consequences to the world’s monetary system. Then, all of a sudden, crypto was a menace. The market ballooned to $3 trillion in value, and it included a new crop of privately issued, asset-backed stablecoins, tokens mainly designed to hold a peg to the dollar or other currencies.
The threat of stablecoins gave central banks a kick in the pants. Today, more than 100 countries and monetary authorities, including the Federal reserve and the European Central Bank, are exploring whether and how to digitize their currencies. And profits are at stake as companies jockey to bring these government-backed currencies to life and operate their technology backbones.