The Many Faces of Digital Currency — And Why the Differences Matter

Happy New Year!

This year, I’m embarking on a journey to deepen my skills and knowledge in the digital space — and I’ll be sharing my learnings with you through this monthly newsletter. To kick off the new year, I’m starting with digital currency. While we often talk about it as if it’s a single concept, digital currency is actually a family of innovations built on the same foundational technology: blockchain.

Now is the right time for business leaders to deepen their understanding of digital currencies — how they work, how they’re used, and how they are regulated. With the passage of the GENIUS Act in the U.S. in 2025, stablecoins now have an emerging federal framework, signaling that regulators are moving from uncertainty to structured oversight. Understanding these developments is critical to positioning your organization to use digital currencies strategically, responsibly, and effectively.

Before diving into the different types of digital currencies, it’s worth pausing to understand what blockchain actually is — and why it’s changing the way we think about money, assets, and possibly, trust.

🔗 What Is Blockchain?

At its core, a blockchain is a digital ledger, a systematized way to record transactions in a shared database that stores records in a secure, transparent, and tamper-resistant way.

Blockchain offers several innovative security features over ordinary data servers and spreadsheets. Its main advantage is decentralized transaction storage. Instead of being stored in one place (like a traditional bank ledger), a blockchain is maintained by a network of computers that all agree on the same version of the record for each transaction. Whereas traditional transaction data is stored in a spreadsheet or a single server, blockchain stores transactions on a network of unrelated computers with each maintaining its own version of the transaction record. This leads us to the next innovation - immutable transaction record. Every new “block” of transactions is linked to the one before it — forming a chain that’s virtually impossible to alter without everyone noticing. Blocks are designed to be unalterable once they are locked into their place in the chain. This feature allows for a direct trail of the transaction through the ledger from inception to the present moment. Many thousands and even millions of records would need to be corrupted to alter information in one block. Finally, the ability to add data to the blockchain is restricted. Only a limited number of individuals can add new information by solving complex mathematical problems and having everyone else in the network agree on the solution and that the transaction is valid. 

Blockchain can support digital currencies, smart contracts and other forms of transactions, and it holds the futuristic promise of enable safe, verified transfer of assets over a trusted network and across borders 24/7 — without needing a central clearing house. However, it is not foolproof and blockchain networks have experienced worrisome vulnerabilities and attacks that put into question the strength of its innovation. Nonetheless, it is (still) a fairly young technology and poised for growth.  Let’s begin by taking a closer look at the types of different digital currencies supported by blockchain. 

🪙 The Different Types of Digital Currencies

Now that we have an understanding of the foundation, here’s how blockchain is being used to create very different kinds of digital money and assets:

1. Cryptocurrencies

The originals — like Bitcoin (BTC) and Ethereum (ETH) — are native to their own blockchains and are intended to be an alternative medium to fiat currency.They operate without a central issuer, relying on distributed networks to validate transactions and secure the system.Think of them as digital commodities: scarce, decentralized, and driven purely by supply and demand. Because cryptocurrencies lack a source of value, such cashflows of a government or a company, I hesitate to call them stores of value. There are two variables affecting the price of crypto - scarcity (there is a limited amount of bitcoins available for issuance) and trading momentum. Outside of these two factors, I do not see any intrinsic value in the crypto that justifies its price movements and therefore, its value.

2. Tokens

Tokens are digital assets built on top of existing blockchains, most often Ethereum. They come in several forms:

• Utility tokens – grant access to a product or service within a platform.

• Security tokens – represent investment contracts, such as tokenized shares or debt instruments.

• Non-fungible tokens (NFTs) – unique, one-of-a-kind digital items used for art, collectibles, and ownership proofs.

  
  

Tokens extend blockchain’s use beyond payments, allowing organizations to program ownership, access, or rewards directly into digital systems.

3. Stablecoins

Stablecoins aim to combine the speed and efficiency of crypto with the reliability of traditional currency. They’re pegged to an external reference (like the U.S. dollar or gold) and backed by reserves or algorithms that maintain stability. Examples include USDC, USDT, and DAI. Their biggest utility lies in becoming the backbone of digital finance — exchange of remittances, liquidity management, and instant cross-border payments. By combining the innovation of blockchain with the traditional external peg, stablecoins are trying to bridge the worlds of crypto and fiat currencies, and in the process, becoming an acceptable medium of exchange for individuals, corporations and governments.  They are not without their risks, the biggest being “de-pegging” which would cause stablecoin to all its value all the way down to zero.

4. Central Bank Digital Currencies (CBDCs)

CBDCs are the public-sector answer to digital money — issued directly by central banks as official digital versions of national currencies. Unlike crypto, they’re not decentralized, but they can use blockchain or distributed ledger technology to improve efficiency, transparency, and inclusivity in the payment system. Pilot programs are active in over 100 countries from the Bahamas to Switzerland. Depending on the country, CBDCs may be available for general public use or only to settle interbank transactions. Nevertheless, the growing acceptance of digital currencies by worldwide governments points to the future of this technology and its wider acceptance in the realm of finance.

5. Tokenized Traditional Assets

This is where traditional finance meets blockchain. Tokenized assets represent ownership of real-world items — equities, bonds, funds, real estate — recorded on a blockchain for faster settlement and fractional ownership. It’s a key step toward 24/7 markets and more efficient capital allocation.

⚖️ Similarities and Differences

Even though these digital currencies share a technological DNA, their purposes and regulatory frameworks differ widely.

Aspect	Cryptocurrency	Token	Stablecoin	CBDC
Issuer	None (decentralized network)	Private company or project	Private firm / protocol	Central bank
Value Basis	Market-driven	Utility or investment link	Pegged to fiat or asset	Fiat-backed
Regulation	Often treated as commodity or property	Typically falls under securities laws	Treated as e-money or payment instrument	Managed under central bank law
Technology	Public blockchain	Smart contract platform	Permissioned or public blockchain	Permissioned DLT or centralized system
Use Case	Investment, payments	Access, ownership, rights	Payments, liquidity	Payments, policy tool

But they share three things:

1. Digital trust: secured by blockchain or similar cryptographic systems.

2. Programmability: the ability to embed rules and logic directly into transactions.

3. Global reach: instant, borderless transfer of value.

👉 The bottom line:

“Digital currency” isn’t one revolution — it’s an ecosystem that is growing and evolving. Each innovation builds on blockchain but serves a different purpose in reimagining how value moves around the world.

For finance and accounting leaders, understanding these distinctions isn’t just technical curiosity — it’s strategic foresight.