The financial industry has been significantly impacted by the emergence of cryptocurrencies, which provide a decentralized alternative to traditional banking systems. Stablecoins, which are intentionally tied to the value of a fiat currency, have gained popularity due to their stability and pegging to a stable asset.

There are various types of stablecoins, including algorithmic, cryptocurrency-backed, and fiat-backed stablecoins, with government-backed stablecoins, also known as central bank digital currencies (CBDCs), now challenging the dominance of privately issued stablecoins like Tether and USDC.

CBDCs aim to combine the benefits of cryptocurrencies with the stability and trust of traditional fiat currencies, offering a higher level of transparency and accountability.