Exploring Digital Currency Options for Curaçao: CBDC vs. Stablecoins in a Two-Tier Framework
In a rapidly evolving financial landscape, Curaçao’s Central Bank of Curaçao and Sint Maarten (CBCS) has been at the forefront of monetary innovation, particularly with the introduction of the Caribbean Guilder (XCG) in March 2025 and ongoing explorations into digital currencies. A hypothetical discussion on implementing a Central Bank Digital Currency (CBDC) versus private stablecoins highlights key design choices, such as two-tier distribution models where commercial banks act as intermediaries, withdrawal mechanisms to physical notes, and risk mitigation through advanced blockchain technologies like Bitcoin’s Taproot Assets. This article distills these concepts, drawing on CBCS’s strategic plans to enhance electronic payments and regulatory frameworks for virtual assets. As Curaçao’s economy relies heavily on tourism and remittances, these digital tools could foster inclusion and efficiency while addressing regulatory concerns.
The Two-Tier CBDC Model: Balancing Innovation and Stability
The CBCS’s approach to a potential XCG CBDC favors a two-tier distribution system, where the central bank issues the digital currency wholesale to licensed commercial banks, which then handle retail distribution to users via apps or wallets. This leverages existing banking infrastructure for know-your-customer (KYC) processes, transactions, and customer support, minimizing the CBCS’s direct involvement in retail operations and avoiding disintermediation of private banks. In contrast, a direct retail model—where the CBCS manages individual accounts—could ensure universal access but risks overwhelming the central bank with data management and scalability issues. During the transition to the XCG, this model integrates seamlessly with traditional deposits, allowing 1:1 conversions between digital CBDC balances and physical notes, as emphasized in CBCS’s push for accessible electronic payments.
Withdrawal of digital XCG to physical notes occurs through bank channels like ATMs or branches, where users debit their CBDC balances in real-time, with the bank settling wholesale with the CBCS if needed. For instance, after withdrawing notes, a user can pay a merchant, who deposits them back into the system, crediting digital balances and maintaining liquidity. This fungibility supports Curaçao’s instant payments system (IP CSM), launched in 2020, ensuring smooth coexistence with existing centralized accounts during the post-2025 currency shift.
Stablecoins as a Private Alternative: Regulatory Feasibility in Curaçao
As an alternative to a CBCS-issued CBDC, a privately issued stablecoin pegged to the XCG or USD could be distributed via a similar two-tier model, with a regulated local institution—like a fintech under the Virtual Asset Service Providers (VASP) Ordinance effective July 2025—handling issuance. Inspired by global players like Tether, this stablecoin would be backed by reserves in XCG assets, audited for transparency, and distributed through commercial banks for retail access. Curaçao’s regulatory environment supports this, as cryptocurrencies are not prohibited and are even used in sectors like
gaming, though exchanges remain largely unregulated, prompting CBCS warnings on investor protections.
Withdrawals mirror the CBDC process: Users redeem stablecoins via banks for physical XCG notes, with backend burning of tokens to release reserves. This model could accelerate adoption for cross-border remittances, vital to Curaçao’s economy, by integrating with IP CSM for hybrid fiat-stablecoin rails. However, risks like peg instability or issuer default are mitigated through mandates like 1:1 reserves, aligning with global stablecoin laws such as the U.S. GENIUS Act.
Enhancing Stablecoins with Bitcoin’s Taproot Assets: Reducing Risks on Layer 2
To address CBCS’s skepticism toward volatile cryptocurrencies, issuing the stablecoin on Bitcoin’s Layer 2 (L2) via Taproot Assets offers enhanced security and reliability over chains like Solana, which have faced outages and exploits. Taproot Assets, with its v0.6 release in June 2025, enables stablecoin minting on Bitcoin’s blockchain, integrated with the Lightning Network for low-fee, instant transfers—ideal for remittances. Bitcoin’s proof-of-work consensus provides unmatched decentralization, reducing vulnerabilities and supporting reliable pegs through private, scalable transactions.
Conclusion
This setup aligns with Curaçao’s fintech pledge, fostering innovation under VASP regulations while minimizing risks like network instability. However, while stablecoins on Bitcoin L2 could empower users with decentralized, private alternatives that enhance financial freedom, CBDCs—despite their proclaimed good intentions for inclusion and efficiency—often devolve into tools of tyrannical control, enabling unprecedented government surveillance, programmable restrictions on spending, and erosion of personal liberties, as critics warn they facilitate a digital panopticon where transactions are tracked, frozen, or conditioned on compliance.
For Curaçao, prioritizing private stablecoin models over CBDCs would better safeguard individual freedoms against such overreach, blending regulatory oversight with true user sovereignty.