Developments regarding digital currency are moving at a rapid pace. Central banks are not only taking further steps towards central bank digital currencies, but significant developments are also taking place in relation to stablecoins, tokenised deposits, regulation and the underlying financial infrastructure. At the same time, an increasing number of practical applications and initiatives are being launched by financial institutions. Below an overview of the key developments at present.
European Central Bank (ECB) prepares digital euro pilot
The European Central Bank has selected 36 payment service providers to participate in the digital euro pilot. The selected participants include Deutsche Bank, Revolut, Stripe, UniCredit, Adyen, SumUp and Worldline. The pilot is expected to begin in the second half of 2027 and will run for twelve months. During the pilot, a beta version of the digital euro will be tested by employees of the ECB and 19 national central banks, together with selected physical and online merchants. The beta version will not have legal tender status. No final decision has yet been made on the actual issuance of the digital euro. Based on the assumption that the necessary European legislation is adopted, the ECB aims to be ready for an initial issuance in 2029.
United States restricts scope for CBDC
The United States has recently enacted legislation prohibiting the Federal Reserve from issuing or creating a CBDC itself or a digital asset that substantially resembles one. The prohibition applies both to direct issuance and to indirect issuance through financial institutions or other intermediaries. However, this provision expires on 31 December 2030. Not every form of digital currency falls within the scope of the prohibition. The legislation provides an exception for US dollar-denominated digital currencies that are openly accessible without prior permission, are private and provide the same privacy protections in use as US coins and cash.
China advances mBridge
Meanwhile, China is continuing to develop mBridge, a platform for cross-border payments using central bank digital currencies. The project involves the monetary authorities and central banks of mainland China, Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia. The platform is designed to enable cross-border transactions to be settled directly using central bank digital currencies. China is preparing for a broader commercial rollout of the system, although an exact commercial launch date has not yet been announced.
According to reports on the plans, transaction costs through mBridge could be significantly lower than those associated with conventional international payment systems. This could make the system particularly attractive to smaller businesses, for which international payments are relatively expensive and complex. The development should be viewed in the context of China’s broader objective of increasing the international use of the renminbi.
mBridge should be distinguished from the existing Cross-Border Interbank Payment System (CIPS). CIPS facilitates conventional cross-border payments in renminbi, whereas mBridge is specifically focused on payments using central bank digital currencies.
United Kingdom develops stablecoin regulation
Developments are also taking place around stablecoins in the UK. The British government has announced that it will give the Bank of England a new secondary objective to support innovation in payment systems and new forms of digital money. Its primary responsibility for financial stability will remain paramount.
In June 2026, the Bank of England published its policy position and draft Code of Practice for issuers of systemic stablecoins. These are stablecoins used sufficiently widely in payments to potentially become relevant to financial stability. A key element concerns the assets backing these stablecoins. The Bank of England will allow up to 70% to be held in short-term UK government bonds. The remaining 30% must be held as deposits with the central bank.
The Bank of England has also abandoned the previously proposed temporary limits on the amount of stablecoins that individuals and businesses would be permitted to hold. Instead, it intends to introduce a temporary maximum total issuance limit for each systemic stablecoin, initially set at GBP 40 billion.
The proposed regime also provides for a trust structure to protect stablecoin holders and to cover costs arising when value must be repaid to them. In addition, the Bank of England intends to prevent issuers from paying interest or other returns to holders linked to the period for which they hold the stablecoin. In addition to interest, this could include tokens, discounts or other forms of remuneration.
New stablecoins gain ground
The composition of the stablecoin market is also changing. Alongside the largest established stablecoins, other market participants have built up significant market shares. These include stablecoins issued by Ethena, PayPal and Ripple.
However, the level of adoption and growth varies by stablecoin and by measurement period. It would therefore be too categorical to state, without further qualification, that these three players are taking over the stablecoin market. They can, however, be regarded as among the newer or rapidly growing participants that have established a more prominent position alongside the established stablecoins.
Banks develop tokenised Sterling deposits
Stablecoins are not the only means by which conventional money is being brought onto digital infrastructure. UK Finance is working with a group of major British banks on the Great British Tokenised Deposit project.
Tokenised deposits are digital representations of traditional deposits held in commercial bank money. The project builds on previous work relating to the UK Regulated Liability Network and explores how such deposits can be used for digital and programmable payments. This includes work on the interoperability required to enable tokenised deposits to be used more widely within the UK payments system.
Moody’s brings credit ratings to blockchain environments
Credit information is also becoming increasingly integrated with digital financial infrastructure. Moody’s has developed the Token Integration Engine (TIE) for this purpose. TIE enables existing credit ratings to be made available in a digital, machine-readable format within blockchain environments.
TIE was first deployed on Canton Network in March 2026. This was followed by an expansion to Solana through Alphaledger in June. The technology has been developed to be network-agnostic and is therefore not limited to a specific blockchain. This enables credit ratings to be made directly available within the infrastructure on which digital financial instruments are issued and traded.
Credit rating agencies focus on de-pegging risk
One of the key risks associated with stablecoins remains the possibility that they may lose their peg to the underlying currency. In 2026, Fitch specifically addressed the challenges involved in assessing the stability of this peg. S&P Global Ratings also assesses stablecoins on their ability to maintain their peg to fiat currency.
In August 2026, S&P reported that six of the eleven stablecoins covered by its Stablecoin Stability Assessments were rated adequate or higher. During the preceding three quarters, two of the eleven assessments were downgraded, while nine remained unchanged.
Significant differences between stablecoins nevertheless remain. S&P considers factors including the quality of underlying assets, credit, market and custody risks, overcollateralisation, liquidity, redeemability, governance, technology and dependence on third parties. The fact that a stablecoin is pegged to, for example, the US dollar therefore does not in itself guarantee that the peg can be maintained under all circumstances.
21 financial institutions collaborate on joint stablecoin
Another significant development is the collaboration between 21 international financial institutions that have committed to establishing a new company for a joint stablecoin solution. The company is expected to be established in 2026, subject to the applicable conditions. Its initial focus will be on a US dollar stablecoin. The group is targeting a market launch in the first half of 2027.
Over the longer term, the initiative intends to expand into stablecoins denominated in other G7 currencies, with the euro identified as a priority. The 21 participating institutions are Bank of America, Capital One, Citi, Fidelity Investments, Goldman Sachs, PNC Financial Services, Scotiabank, TD Bank Group, Wells Fargo, WisdomTree, Banco Santander, BBVA, Commerzbank, Credit Agricole, Deutsche Bank, Lloyds Banking Group, Rabobank, UBS, MUFG Bank, Sirius International Holding and Standard Bank.
The intended applications span wholesale, institutional and retail markets. These include cross-border payments and the settlement of digital assets. The initiative follows an exploratory collaboration announced by ten banks in October 2025. The group has since expanded to include 21 financial institutions.
Tether undergoes first full financial audit
A significant development also took place in 2026 in relation to Tether, the issuer of USDT, the world’s largest stablecoin. KPMG U.S. conducted a full independent audit of the financial statements of Tether International for the financial year ended 31 December 2025. KPMG issued an unqualified audit opinion.
The audit went beyond the periodic reporting on Tether’s reserves and covered the full financial statements. As part of the audit, Tether’s gold holdings were also physically verified. KPMG counted and inspected the individual gold bars to confirm their existence and identifying information.
BIS highlights potential gap in stablecoin supervision
The Financial Stability Institute of the Bank for International Settlements has compared regulatory frameworks for stablecoin issuance in the European Union, Hong Kong, Singapore, the United Kingdom and the United States.
One area of concern is that restrictions on activities are generally imposed on the legal entity issuing the stablecoin, rather than necessarily applying to the entire corporate group. A non-bank stablecoin issuer, for example, may itself be restricted from engaging in activities such as lending, staking or custody, while affiliated companies within the same group may still be able to conduct such activities.
Banks are already subject to consolidated prudential supervision, which can restrict such shifts in activities within a corporate group. An equivalent group-wide regime does not necessarily exist for non-bank stablecoin issuers. The FSI therefore argues that stablecoin regulation or related supervisory frameworks may also need to incorporate group-level supervision, particularly in the case of larger non-bank issuers.
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