Inside the chapter: Basel Framework, Credit Rating Agencies and Digital Money

3.12 Digital Money — Cryptocurrency, Stablecoins, and CBDCs

The idea in plain words

Crypto, stablecoins and central bank digital currencies differ by who issues them and what backs them. TerraUSD showed that a stablecoin backed by its own sister token can run like an unprotected bank, while the US GENIUS Act of July 2025 now requires payment stablecoins to hold liquid reserves.

A closer look

Retail CBDCs remain rare. A few smaller economies, such as the Bahamas (Sand Dollar) and Jamaica (JAM-DEX), have issued one to the public. China’s e-CNY is the most advanced in a major economy but remains in controlled rollout, and India’s retail e-rupee began on December 1, 2022, as a pilot in a closed group of customers and merchants in four cities. The United States has gone the other way, by executive order rather than by law: Executive Order 14178 of January 23, 2025, prohibits federal agencies from “undertaking any action to establish, issue, or promote CBDCs” and ended any plans already under way. A bill to write the ban into law, the Anti-CBDC Surveillance State Act, had not been enacted as of October 2026.

Recap

Crypto, stablecoins and CBDCs differ by who issues them and what backs them. TerraUSD showed that a stablecoin backed by its own sister token can run like an unprotected bank, while the GENIUS Act (July 2025) now requires US payment stablecoins to hold liquid reserves such as short-term Treasury bills; Executive Order 14178 bars federal agencies from creating a US CBDC.

3.13 The BIS and the Basel Framework — Global Banking Rules

The idea in plain words

The Basel framework sets how much loss-absorbing capital banks must hold against their risk-weighted assets. Basel III requires common equity tier 1 capital of at least 4.5%, plus a 2.5% buffer, backed by a 3% leverage ratio.

A closer look

The Bank for International Settlements (BIS), headquartered in Basel, Switzerland, is often called “the central bank for central banks.” It is where the world’s major central banks coordinate, share research, and agree on common rules for banking supervision. Its most consequential output is the Basel framework: a globally agreed set of rules on how much capital cushion banks must hold relative to the risks on their balance sheets.

3.14 Credit Rating Agencies — The Scorekeepers of Trust

The idea in plain words

Moody’s, S&P and Fitch grade debt from AAA to D, and the grade determines how cheaply anyone can borrow. Their issuer-pays model failed in 2008 and still endures.

A closer look

Lenders face an information problem: how risky is this borrower, really? Credit rating agencies answer it at industrial scale, grading debt from AAA (safest) through the crucial cliff at BBB− — the boundary of “investment grade” — down into speculative “junk” territory. The cliff matters because vast pools of money (pension funds, insurers, many bond funds) are required to hold investment-grade paper only; a downgrade across that line triggers forced selling regardless of anyone’s opinion. Sovereign ratings work identically: when an agency downgrades a country, its borrowing costs rise across the board — S&P’s unprecedented downgrade of the US from AAA in 2011, Fitch’s repeat in 2023, and Moody’s completion of the set in May 2025 — leaving the US without a AAA rating from any of the three agencies for the first time — were geopolitical events.

What the full article covers

In the full article I take you through these sections:

■3.12 Digital Money — Cryptocurrency, Stablecoins, and CBDCs

■3.13 The BIS and the Basel Framework — Global Banking Rules

■3.14 Credit Rating Agencies — The Scorekeepers of Trust

It includes worked examples, a recap, a reveal-on-click quiz and the official sources behind every figure.