When Money Becomes Data

_{^{IN PARTNERSHIP WITH}}

The transformation of money into data represents one of the most significant shifts in global finance since the advent of paper currency. As payment networks evolve from physical to digital-first systems, governments and central banks worldwide are racing to establish the infrastructure that will define how value moves through the digital economy. This evolution extends far beyond mere convenience—it fundamentally alters the relationship between states, financial institutions, and individual privacy.

For readers watching how the next chapter of America’s financial system unfolds, preparation may matter more than prediction.

The United States finds itself at a crossroads in this transition. While the Federal Reserve has steadily expanded its FedNow instant payment system, which now serves approximately 1,000 financial institutions and processes transactions within seconds, broader questions about digital currency policy remain unsettled. Federal Reserve Chair Jerome Powell recently emphasized that the central bank was "nowhere near" implementing a central bank digital currency (CBDC), stating that "people don't need to be concerned about a central bank digital currency; nothing like that is even remotely on the horizon". This cautious approach contrasts sharply with more aggressive digital currency initiatives elsewhere in the world.

The foundation for data-driven money already exists in multiple forms across the American financial system. FedNow, launched in 2023, has established real-time payment capabilities that complete transactions within seconds. It shows the Fed’s push to modernize payment rails while avoiding direct consumer currencies.

Simultaneously, stablecoin regulation has gained momentum through congressional action. Senator Bill Hagerty's comprehensive stablecoin legislation, released in October 2024, establishes federal oversight for issuers exceeding $10 billion in total stablecoin circulation while allowing smaller issuers to remain under state regulation. This two-tiered approach recognizes that stablecoins have become integral to digital payment ecosystems, with the GENIUS Act requiring full backing by U.S. dollars or Treasuries and monthly reserve disclosures.

The Bank for International Settlements' 2024 survey revealed that 91% of central banks globally are exploring CBDC initiatives, with wholesale applications advancing more rapidly than retail versions. This widespread experimentation suggests that the question is not whether money will become increasingly data-driven, but rather which models will prove most effective and widely adopted.

China continues to lead in retail CBDC deployment through its e-CNY system, which now operates across 23 pilot cities with over 260 million digital wallets in circulation. The system processes transactions worth approximately $986 billion as of June 2024, demonstrating significant scale in real-world usage. The Chinese approach emphasizes domestic retail applications while maintaining strict government oversight of transaction flows, representing a model that prioritizes state control over financial privacy.

The European Central Bank has taken a more deliberative approach with its digital euro project, currently in a two-year preparation phase that began in November 2023. The ECB's latest progress report, published in December 2024, highlights ongoing work on privacy protection, holding limits, and offline payment capabilities. European policymakers have positioned the digital euro as a complement to cash rather than a replacement, addressing concerns about financial inclusion and monetary sovereignty in an increasingly digital economy.

Singapore's Project Orchid represents perhaps the most innovative approach to programmable money through its Purpose Bound Money (PBM) protocol. The Monetary Authority of Singapore launched its SGD Testnet in November 2024, enabling financial institutions to settle transactions using wholesale CBDC while exploring tokenization applications.

The digitization of money creates unprecedented opportunities for transaction monitoring and financial surveillance. European regulators have warned that digital payment systems must balance security with robust privacy protections. These concerns reflect broader tensions between fraud prevention, regulatory compliance, and individual privacy rights in digital payment systems.

Federal Reserve Governor Christopher Waller recently emphasized the central bank's commitment to supporting private sector innovation while maintaining core infrastructure functions. The regulatory approach to stablecoins illustrates this balance between innovation and oversight. Treasury Secretary Janet Yellen has consistently advocated for comprehensive federal regulation of stablecoin issuers, arguing that "current oversight is inconsistent and fragmented, with some stablecoins effectively falling outside the regulatory perimeter". The recent passage of federal stablecoin legislation addresses these gaps while preserving space for private sector innovation.

The Federal Reserve's continued investment in FedNow infrastructure, combined with evolving stablecoin regulations, points toward a hybrid model that leverages both public infrastructure and private innovation.

This transformation carries significant implications for monetary policy transmission, financial inclusion, and the global competitiveness of dollar-based payment systems. As other nations advance their digital currency initiatives, American financial institutions and policymakers must balance innovation with stability, ensuring that the dollar's role as the world's primary reserve currency adapts successfully to an increasingly digital global economy.

The quiet race to redefine currency continues, with data replacing physical form as the primary medium of monetary exchange. The winners will be those who balance technology with trust, innovation with oversight, and sovereignty with interoperability.

Deniss Slinkins,
Global Financial Journal