Digital currencies are reshaping how money moves worldwide. From central bank digital currencies (CBDCs) to privately issued stablecoins, this new wave of digital money combines the reliability of government-backed cash with the speed and reach of modern payments. Digital currencies can enable nearly instant global payments for businesses while lowering transaction costs and providing access to customers who’ve never used traditional banks.

According to estimates, stablecoins alone could achieve a $2 trillion market cap by 2028. Below, we’ll explore how digital currencies work and what opportunities and risks they pose for businesses.

What’s in this article?

• How do digital currencies work?
  
• How are digital currencies issued?
  
• What are the benefits of digital currencies?
  
• What concerns are holding back a full shift to digital money?
  
• How can businesses prepare for digital currency systems?
  
• How Stripe Payments can help
  

How do digital currencies work?

Behind every digital payment is a system that keeps money secure so it can’t be copied, forged, or lost. Digital currencies use smart recordkeeping and strong cryptography to protect payments.

Here’s how they work:

They keep track

Every system needs a ledger, or a record of who owns what. Some use a centralized database, run by one trusted operator (e.g., a central bank). Others use a shared ledger (e.g., a private blockchain) that multiple banks or institutions maintain—it’s slower but more resilient because no single party controls everything.

They run on two ownership models

There are two main models to confirm ownership:

• Account-based: The system verifies your identity before it transfers the money, similar to logging in to your bank account.

• Token-based: The system checks what you hold and uses cryptographic proof to determine whether the digital “token” belongs to you.

Modern systems can mix both models: they verify the identity once, then start a secure automatic transfer.

They verify transactions

When someone sends a digital currency, the system must confirm the funds are real and haven’t been spent twice. In centralized systems, a main database performs this function. In shared systems, a group of validators (computers or institutions) will agree on each transaction in a process known as consensus. Every payment is signed with a digital signature to prove it came from the rightful owner.

They hold and use digital money

Digital currency is stored in a wallet. This might be in an app, on a smart card, or in a secure device with key storage. Wallets let someone safely send, receive, and store money. Some allow limited offline payments so small transfers can still occur without internet access and be synced later.

How are digital currencies issued?

Digital currencies combine the trust and stability of government-issued money with the speed and reach of modern networks. Public institutions and private innovators must coordinate to create and maintain a digital currency.

Each actor plays a distinct role.

Central banks

Central banks design the CBDCs, set their rules, and guarantee their value. Some are testing a “two-tier” system: the central bank manages issuance and settlement, while private banks or payment firms handle customer-facing services. This structure enables improvement while preserving monetary control.

Governments

Policymakers define the legal framework by declaring CBDCs legal tender, regulating stablecoins, and setting privacy and global compliance standards. Some governments see CBDCs as a tool to strengthen domestic financial infrastructure or reduce reliance on foreign payment networks.

Private businesses

Fintechs, banks, and payment providers build the user experience—the wallets, application programming interfaces (APIs), and integrations that make digital currencies usable in daily life. They connect customers and businesses to the underlying systems, which often convert between traditional and digital money. Payments infrastructure businesses let other businesses accept stablecoin payments and settle them in fiat currency, which makes the technology practical without the need for technical expertise.

What are the benefits of digital currencies?

Digital currency adoption is steadily increasing. Over $94 billion in stablecoin payments were settled between January 2023 and February 2025. At the current growth rate, daily stablecoin transaction volumes could reach $250 billion within the next 3 years.

Here are some benefits of digital currencies:

• Faster, cheaper payments: Cross-border payments involve layers of banks and networks. Digital currencies, especially those built on efficient payment methods such as blockchain, can settle instantly, operate 24/7, and do so at a lower cost. Stablecoins already move trillions of dollars annually.

• Financial inclusion: Over a billion people lack a bank account, but many have a smartphone. A CBDC could serve as a straightforward, secure way to store and transfer money without requiring a traditional bank relationship. CBDCs are government backed, so users wouldn’t face counterparty risk.

• Government efficiency and transparency: Digital currency lets governments move money with precision. Relief payments, tax refunds, or subsidies could be distributed instantly, which minimizes administrative overhead and fraud. It also gives policymakers more visibility into the flow of funds, which can strengthen monetary oversight and financial stability.

• Improved cash flow: Programmable money enables automatic payouts. So businesses can pay suppliers, release escrow, or distribute royalties based on smart contract conditions. Treasury teams can see cash positions update in real time across markets, which tightens liquidity management and frees up working capital.

What concerns are holding back a full shift to digital money?

If they’re designed well, digital currencies can improve payment security and privacy. But challenges remain. Here are areas that might slow adoption:

• Cybersecurity and resilience: When digital currencies become part of a country’s necessary infrastructure, they can become prime targets for hackers or state-level attacks. Systems need layered security to prevent breaches or outages, including strong encryption, continuous monitoring, and redundant architecture.

• Privacy and data protection: Many central banks are pursuing tiered privacy, in which small transactions remain anonymous but larger ones require identity verification. Some are testing cryptographic tools, such as zero-knowledge proofs, that verify a payment’s validity without revealing personal details. The goal is to provide privacy for lawful users and transparency for investigators with legal authority.

• Illicit finance and regulation: Regulators want to stop money laundering, terrorist financing, and tax evasion. Digital currencies will likely embed limits, reporting thresholds, and smart monitoring to flag suspicious activity in real time.

• Systemic risk: In crises, people could rush to convert bank deposits into CBDCs, which would drain commercial banks. Capping holdings or using tiered interest rates is a possible solution for preventing digital bank runs.

How can businesses prepare for digital currency systems?

More than 130 countries, representing 98% of global gross domestic product (GDP), are exploring CBDCs. Here’s how to be at the forefront:

• Stay informed: Track what your local central bank and regulators are doing regarding CBDCs and stablecoin policy. Find out how new forms of digital money could affect your payment flows, compliance obligations, or cross-border operations.

• Upgrade your systems: Digital currency transactions typically settle in real time. Review whether your payment gateways, accounting software, and enterprise resource planning (ERP) systems can handle instant reconciliation, programmable payouts, and direct blockchain integrations. Modern, API-first infrastructure makes it easier to plug in new systems.

• Strengthen security: Establish clear controls for authorization, key custody, and recovery protocols to manage wallet access and digital assets. Train teams to recognize phishing and social engineering risks tied to digital payments.

• Experiment and integrate: Work with reliable partners on pilots for stablecoin or CBDC payments. Providers such as Stripe let businesses accept stablecoin payments and receive settlement in fiat, which removes the technical burden and introduces the concept to customers.

• Plan for a hybrid future: In the long term, cash, cards, and digital currencies will likely coexist. Flexible systems that can handle multiple payment types will give businesses a lasting advantage.

How Stripe Payments can help

Stripe Payments provides a unified, global payment solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment user interfaces (UIs), access to 125+ payment methods, and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payment performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.