Congress just blocked the Federal Reserve from issuing a CBDC, and the companies benefiting most are private stablecoin issuers like Circle and Tether.
The 21st Century ROAD to Housing Act passed the Senate 85-5 on June 22 and cleared the House 358-32 the next day, and folded inside that housing package is a four-year ban on a Fed-issued central bank digital currency.
On the surface, it’s a clean win for crypto, because a government digital dollar would have competed head-on with private dollar tokens, and now it can’t arrive until 2031 at the earliest.
But the catch is that the Fed was never close to launching one. So Congress has blocked a competitor that wasn’t coming, while the contest that counts is taking shape inside the banking system. America’s largest banks are building a digital-money network of their own, and it could do much of what stablecoins promise while keeping cash on bank balance sheets.
What ended this week was the government’s path to a digital dollar, and the private race to build one carried right on, running straight through the commercial banks.
The CBDC ban blocks a rival that was never on its way
Most of the money people already use is digital. When you open a banking app and see a balance, that figure isn’t cash sitting in a vault with your name on it. It’s a bank deposit, a claim on the bank, money the bank owes you, and lets you spend with a card or send by transfer.
Physical cash is the one form of public money that comes straight from the government through the Fed. Everything else you hold day-to-day is a promise from a private company.
A central bank digital currency would add a third kind of money to that mix. The Fed defines a CBDC as a digital dollar that’s a direct liability of the central bank and available to the general public. It would be government-issued digital cash, a balance backed by the Fed itself and spendable from a phone.
Most of the world is already pursuing some version of this: China runs a digital yuan at scale, the European Central Bank is preparing a digital euro for a 2029 launch, and well over 100 countries are researching or piloting it.
Supporters of a digital dollar argue it could make payments faster and cheaper, and reach people the banking system leaves out. Opponents see something closer to a surveillance tool, a payment system the government could monitor and shut down, and one that would pull deposits and business away from banks and private dollar tokens alike.
It now seems that the second camp won. Fed Chair Kevin Warsh called a US CBDC a “bad policy choice” at his confirmation hearing, Treasury Secretary Scott Bessent said a digital dollar was “off the table,” and Trump signed an executive order against it back in January 2025.
The provision in the housing bill turns that political consensus into law through the end of 2030, and even after that, the Fed would need fresh authorization from Congress to revive the project.
This is obviously very appealing to stablecoin issuers. A stablecoin is a digital token designed to represent one dollar, issued by a private company and backed by reserves of cash and short-term Treasury bills. Circle’s USDC and Tether’s USDT dominate the category, together making up more than 80% of a market now worth roughly $320 billion.
These companies got their federal rulebook last summer with the GENIUS Act, which requires one-to-one reserves, monthly disclosures, and bars issuers from paying interest to holders. A CBDC would have entered the market with the central bank’s balance sheet and credibility behind it, the kind of competitor no private issuer could match.
Freezing it for four years clears the field, and the bill even carves out an explicit exemption for open, private dollar tokens to ensure stablecoins remain outside the ban.
The reason that win counts for less than it looks is that the Fed had no retail digital dollar in the pipeline. It produced research papers and ran a small pilot at the Boston Fed, and that was pretty much the extent of it. Killing a product that nobody was shipping removes a threat that lived only on paper.
Stablecoin issuers still avoided a powerful rival in theory, and that’s worth something for an industry whose entire pitch is regulatory certainty. The harder fight was always going to come from a direction the housing bill doesn’t touch.
The competitor that’s actually being built
The real challenge to stablecoins is coming from the banks. JPMorgan, Citigroup, Bank of America, and Wells Fargo, along with more than a dozen other lenders, are building a shared network for tokenized deposits, operated through The Clearing House, the bank-owned payments company.
They’re targeting the first half of 2027 for launch. Some banks call the project “the bridge,” others call it “the chain.”
A tokenized deposit is an ordinary bank deposit recorded on a blockchain. The money remains a bank liability, retains its FDIC eligibility, and stays within the same regulated system it does today, while gaining the features that made stablecoins useful: instant settlement, round-the-clock movement, and programmable payments.
The banks found their legal opening in the same stablecoin law that helped Circle and Tether. The GENIUS Act excludes deposits recorded on a digital ledger from its definition of a payment stablecoin, so a bank can move customer money on new rails and still call it a deposit. The FDIC reinforced the line in April, noting that money parked as stablecoin reserves wouldn’t carry pass-through insurance to the token holder, while a tokenized deposit keeps ordinary deposit protection.
That gives you three flavors of digital dollar competing for the same job. Stablecoins are digital dollars from crypto companies, tokenized deposits are digital dollars from banks, and a CBDC would have been digital dollars from the central bank. The housing bill removed the third option for four years and left the first two to fight it out.
Banks are fighting because deposits are the core of their business. When money sits in checking and savings accounts, banks lend against it, and that cheap funding is what makes the business work. A large cash migration into stablecoins would drain that base.
US banking groups warned Congress last year that the wrong rules could push up to $6.6 trillion out of the deposit system, thereby shrinking lending capacity and raising borrowing costs. JPMorgan CEO Jamie Dimon has fought hard against letting stablecoin platforms pay anything that looks like yield for the same reason. The tokenized deposit network is the constructive half of that response. The banks want digital money to keep up with crypto, and they want it to stay bank money.
Plenty of policymakers think the banks are positioned to win this. Bank of England official Megan Greene argued at a conference in late May that tokenized deposits will probably take over from stablecoins within five years, and that we might one day wonder why we spent so long talking about stablecoins at all. She framed it as a race between three animals, with the CBDC as the slow tortoise, stablecoins as the quick hare, and tokenized deposits as the rhino she’d bet on.
Fed Governor Christopher Waller pushed back at the same event, defending stablecoins as healthy payment competition with nothing dangerous about them. The split shows how unsettled the question remains, even among those who regulate it.
There are real reasons to stay skeptical of the bank network, too. Bank of America’s payments chief admitted clients aren’t “beating down the door” for tokenized deposits yet, and the network has no blockchain vendor selected and a launch still more than a year out.
Most early users are expected to be large multinational companies handling treasury and cross-border payments, which means tokenized deposits may remain a wholesale tool for big institutions for a while, leaving stablecoins to dominate the open, public side of crypto.
Adoption takes time, and a 2027 target leaves a long runway for stablecoin firms to lock in merchants, fintech apps, and payroll systems first.
This contest will eventually shape how fast money moves, who controls the rails it moves on, and whether you can earn anything on a digital cash balance. Stablecoins already settle in seconds, any hour, any day. Banks want tokenized deposits to match that speed while keeping the money in accounts that look and behave like the ones people have now.
The version that wins broad adoption will decide whether everyday digital dollars run on open crypto networks or inside closed bank systems, and whether they pay you a share of the interest those reserves earn.
That’s the fight the housing bill pushed down the road. The bill settled one thing cleanly: the Fed can’t issue a retail CBDC before 2031. The bigger decision now belongs to crypto companies and banks: which of them will issue the digital dollars Americans actually end up using. That choice will turn on the rules regulators are still writing, including how much yield each side can offer and how heavily each gets supervised.
There’s even a small wrinkle in whether the ban becomes law on schedule. President Trump abruptly canceled the planned signing ceremony on June 24, tying it to a separate voting bill he wants passed first, though House leaders expect him to sign the housing package within days regardless. The political theater around the signature will keep going, but the substance underneath it points in the same direction either way.
The Fed’s CBDC is frozen, and most of the country won’t notice because it was never coming anyway. But the digital dollars people actually use are faster than the CBDC debate suggested. Congress froze the government’s version, and the private versions kept racing, with the banks already set for launch.
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