Congress just blocked the Federal Reserve from issuing a CBDC, and the companies that benefit most from it are private stablecoin issuers like Circle and Tether.
The 21st Century ROAD to Housing Act passed the Senate 85-5 on June 22 and passed the House of Representatives 358-32 the next day, and that housing package includes a four-year ban on a Fed-issued central bank digital currency.
On the face of it, it’s a clean win for crypto, as a government digital dollar would have competed head-on with private dollar tokens, and now it might not 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 who didn’t come, while the battle that matters within the banking system takes shape. America’s largest banks are building their own digital money network, and this could do much of what stablecoins promise, while keeping the money on bank balance sheets.
What ended this week was the government’s path to a digital dollar, and the private race to build one continued, right through the commercial banks.
The CBDC ban blocks a rival that was never coming
Most of the money people already use is digital. When you open a banking app and see a balance, that’s not cash sitting in a safe with your name on it. It is a bank deposit, a claim on the bank, money that the bank owes you and that you can spend by card or by bank transfer.
Physical cash is the only form of public money that comes directly from the government through the Fed. Everything else you hold on a daily basis 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 is a direct obligation of the central bank and available to the general public. It would be government-issued digital money, a balance backed by the Fed itself that can be spent via a phone.
Most of the world is already pursuing some version of this: China is running a digital yuan at scale, the European Central Bank is preparing a digital euro for a 2029 launch, and more than a hundred countries are researching or testing it.
Proponents of a digital dollar argue that it could make payments faster and cheaper, and reach people left out by the banking system. Opponents see something closer to a surveillance tool, a payment system that the government could monitor and shut down, and a system that would draw deposits and businesses away from both banks and private dollar mints.
It now appears that the second camp has won. Fed Chairman Kevin Warsh called a US CBDC a “bad policy choice” during his confirmation hearing, Treasury Secretary Scott Bessent said a digital dollar was “off the table,” and Trump signed an executive order against it in January 2025.
The provision in the housing bill puts that political consensus into law until the end of 2030, and even after that the Fed would need new authorization from Congress to revive the project.
This is obviously very attractive for stablecoin issuers. A stablecoin is a digital token designed to represent one dollar, issued by a private company and backed by cash reserves and short-term government bonds. Circle’s USDC and Tether’s USDT dominate the category, together representing more than 80% of a market now worth approximately $320 billion.
These companies got their federal rulebook last summer with the GENIUS Act, which requires one-for-one reserves, monthly disclosures and prohibits issuers from paying interest to holders. A CBDC would have come to market with the balance sheet and central bank credibility behind it, the kind of competitor that no private issuer could match.
Freezing it for four years levels the playing field, and the bill even provides an explicit exception for open, private dollar tokens to ensure that stablecoins remain outside the ban.
The reason profit counts less than it seems is that the Fed did not have a digital retail dollar in the pipeline. It produced research papers and did a small pilot at the Boston Fed, and that was about the extent of it. Killing a product that no one shipped eliminates a threat that only existed on paper.
Stablecoin issuers still theoretically avoided a powerful rival, and that’s worth something to an industry whose whole point is regulatory certainty. The harder fight would always come from a direction that the housing law does not address.
The competitor that is actually built
The real challenge for stablecoins comes 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, managed through The Clearing House, the bank’s owned payments company.
They are targeting the first half of 2027 for launch. Some banks call the project ‘the bridge’, others call it ‘the chain’.
A tokenized deposit is a regular bank deposit recorded on a blockchain. The money will remain a bank liability, retain its FDIC eligibility, and remain within the same regulated system as today, while gaining the features that made stablecoins useful: instant settlement, 24-hour 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 the definition of a payments stablecoin, so a bank can move customers’ money on new rails and still call it a deposit. The FDIC reinforced this line in April, noting that funds parked as stablecoin reserves would have no pass-through insurance for the token holder, while a tokenized deposit retains regular deposit protection.
That gives you three types of digital dollars 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 law eliminated the third option for four years, leaving the first two to duke it out.
Banks fight because deposits are at the core of their business. When money is in checking and savings accounts, the banks lend money for it, and that cheap financing ensures that the company continues to operate. A major migration from cash to stablecoins would empty that base.
U.S. banking groups warned Congress last year that the wrong rules could squeeze up to $6.6 trillion from the deposit system, shrinking borrowing capacity and raising borrowing costs. JPMorgan CEO Jamie Dimon has fought hard against allowing stablecoin platforms to pay anything resembling returns for the same reason. The tokenized deposit network is the constructive half of that answer. The banks want digital money to keep pace with crypto, and they want bank money to stay.
Many policymakers think the banks are in a position to win this. Bank of England official Megan Greene argued at a conference in late May that tokenized deposits will likely take over from stablecoins within five years, and that we might one day wonder why we’ve been talking about stablecoins for so long in the first place. She described it as a race between three animals, with the CBDC as the slow tortoise, stablecoins as the fast hare and token deposits as the rhino she had bet on.
Fed Governor Christopher Waller pushed back against the same event, defending stablecoins as healthy payments competition without anything dangerous about them. The split shows how uncertain the issue remains, even among those who regulate it.
There are also real reasons to remain skeptical about the banking network. Bank of America’s payments chief admitted that customers are not yet “knocking on the door” for tokenized deposits, and the network has not yet selected a blockchain vendor with a launch still more than a year away.
Most early adopters are expected to be large multinational companies that handle treasury and cross-border payments, meaning tokenized deposits could remain a wholesale tool for large institutions for a while, allowing stablecoins to dominate the open, public side of crypto.
Adoption takes time, and a 2027 target leaves a long way for stablecoin companies to be the first to capture merchants, fintech apps and payroll systems.
This competition will ultimately determine how fast money moves, who controls the rails it moves on, and whether you can make anything with a digital cash balance. Stablecoins settle within seconds, at any hour, on any day. Banks want tokenized deposits that match this speed, while keeping the money in accounts that look and behave like the accounts people have now.
The version that gains widespread acceptance will decide whether everyday digital dollars run on open crypto networks or within closed banking systems, and whether they pay you a share of the interest those reserves earn.
That is the struggle that has put the housing law in question. The bill neatly settled one thing: the Fed cannot issue retail CBDC before 2031. The bigger decision now lies with crypto companies and banks: which of them will issue the digital dollars that Americans will eventually use. That choice will depend on the rules that regulators are still writing, including how much yield each party can offer and how heavily it is supervised.
There is even a slight difference in whether the time ban will become law. President Trump abruptly canceled the planned signing ceremony on June 24, tying it to a separate voting bill that he wants to pass first, although House leaders expect him to sign the housing package within days anyway. The political theater surrounding the signature will continue, but the content underneath points in the same direction regardless.
The Fed’s CBDC is frozen, and most of the country won’t notice because it will never get there anyway. But the digital dollars that people actually use Are faster than the CBDC debate suggested. Congress froze the government version, and the private versions kept racing, while the banks were already ready to launch.