Davos: The tension over the future of the monetary system between crypto and traditional finance

While the World Economic Forum gathered top global leaders in Davos, a discussion about blockchain infrastructure evolved into an intense debate about the foundations of the contemporary monetary system. At the center of the confrontation: Coinbase CEO Brian Armstrong and the Governor of the Bank of France, François Villeroy de Galhau, holding radically different opinions on how economies should be structured in the coming decades.

The backdrop was tokenization and financial innovation, but the dialogue quickly shifted to much more fundamental issues: whether stablecoins should pay yields to their holders, how bitcoin fits into the global monetary system, and whether crypto innovation poses a threat or an opportunity for Western democracies.

Stablecoins, yields, and global competitiveness

Armstrong advocated a position that prioritized consumer interests and international competition. For him, allowing stablecoins to generate yields was not just an economic justice issue but a matter of competitive survival.

“First, it puts more money in consumers’ pockets. People deserve to earn returns on their money,” Armstrong stated. “Second, from a global competitiveness perspective: China has already declared that its CBDC will generate yields, and offshore stablecoins already exist. If regulated stablecoins in the US are prohibited from offering rewards, offshore competitors will thrive.”

The argument revealed a broader concern: the fear that overly strict regulatory restrictions could push financial innovation out of Western jurisdictions, further fragmenting the global monetary system.

Villeroy de Galhau, however, remained firm. For the French governor, yield-bearing stablecoins posed a significant systemic risk to the stability of traditional finance. When asked whether a digital euro should offer interest, his answer was categorical: “No.”

“Monetary policy also serves a public purpose: preserving the stability of the financial system,” Villeroy explained, rejecting any competition based on yields between central bank digital currencies and private assets.

Divergent views on regulation and fairness

Bill Winters, CEO of Standard Chartered, offered an intermediate perspective. His bank, already significantly involved in the digital assets industry, recognized an economic reality: tokens without yields lose their appeal as a store of value.

“Tokens will be used in two ways: as a medium of exchange and as a store of value. As a store of value, they are much less attractive if they do not generate yields,” Winters observed, aligning with Armstrong’s concern about the economic viability of stablecoins.

Brad Garlinghouse, CEO of Ripple, adopted a more conciliatory tone but raised a critical issue about fairness. He agreed that competition is beneficial but emphasized that a level playing field must work both ways.

“A level playing field means crypto companies should follow the same standards as banks, and banks should be subject to the same standards as crypto companies,” Garlinghouse argued, highlighting a shared concern: that regulations do not create asymmetries favoring one side over the other.

Armstrong returned to the issue of US legislation, contextualizing Coinbase’s recent withdrawal of support for the CLARITY Act. For him, it was not an abandonment of innovation but resistance to the banking lobby’s efforts to tilt the rules of the game.

“We want to ensure that any cryptocurrency law in the US does not prohibit competition. Banking lobby organizations in Washington are trying to ban their competitors, and I cannot accept that,” Armstrong said, reinforcing the idea that regulatory battles reflect deeper disputes over market access.

Bitcoin and the new monetary paradigm

The discussion peaked when Armstrong provocatively promoted the idea of a “bitcoin standard” as an alternative to the traditional monetary system, drawing historical parallels with the gold standard.

“We are witnessing the birth of a new monetary system that I would call the bitcoin standard, instead of the gold standard,” Armstrong declared, suggesting that bitcoin could serve as a store of value in a reconfigured future.

Villeroy rejected the premise emphatically. For him, monetary policy and sovereignty are inseparable in democracies. “Money and monetary policy are part of sovereignty. We live in democracies,” the governor responded, arguing that trust in the monetary system rests on the institutional independence of central banks.

However, Armstrong saw a fundamental contradiction in this response. Bitcoin, often inaccurately characterized by critics as having an “issuer,” is actually a fully decentralized protocol.

“Bitcoin is a decentralized protocol. It doesn’t have an issuer,” Armstrong corrected. “And therefore, in the sense that central banks have independence, bitcoin is even more independent. No country, company, or individual in the world controls it.”

The exchange revealed a deep philosophical conflict: Villeroy viewed the monetary system as a necessary expression of sovereignty and democracy, while Armstrong envisioned an evolution where the monetary system could operate in a decentralized and independent manner from any political entity.

Risks and opportunities in transforming the monetary system

Villeroy countered by warning about the political dangers of a fragmented monetary system. His concern: if private and tokenized money dominates, emerging economies could especially lose their financial autonomy.

“Innovation without regulation can create serious trust issues. The first threat is the privatization of money and the loss of sovereignty,” the French governor warned, painting a scenario where jurisdictions could become dependent on foreign issuers if the private sector is left unrestrained.

The critique underscored a legitimate anxiety: that the transition to a new monetary system, particularly if driven by bitcoin and stablecoins, could fundamentally reconfigure global economic power relations, potentially to the detriment of smaller or less developed nations.

An unlikely consensus emerges

Despite tensions and substantial disagreements, a point of convergence emerged during the panel. Garlinghouse later reflected that all parties recognized a fundamental truth: innovation and regulation are not adversaries but must find ways to coexist.

“Innovation and regulation must coexist,” became the shared conclusion, even though the parties remained deeply divided on how this coexistence should work in practice.

What Davos’s debate made clear is that the transformation of the monetary system is not merely technical or economic but fundamentally political. Questions about stablecoins, bitcoin, and tokenization are ultimately questions of sovereignty, power, and how the world wants to organize the flow of value in the coming decades.

The tension between decentralized innovation and democratic oversight remains at the heart of this transformation, and resolving this tension will be crucial in shaping how the monetary system evolves globally.