Chapter 4 deals with private sector digital currencies, focussing especially on synthetic CBDCs, private digital currencies that are fully backed by riskless central bank currency. Synthetics have various advantages for users compared to CBDCs: synthetics allow the private sector and the central bank to play to their strengths; synthetics avoid central bank conflicts of interest that arise when the central bank regulates firms that it also competes against; synthetics avoid drawbacks of monopoly provision; synthetics avoid negative seigniorage for the issuer; and synthetics tend to stabilise the financial system.

Market evidence indicates that the public are very enthusiastic about synthetics and stablecoins. Stablecoin market cap grew from under $1 million at the start of 2016 to $242 billion by January 2025 and most of these stablecoins are dollar ones. Yet the success of stablecoins pales in comparison to the success of private sector digital currencies more generally. By a big margin, the most successful money in the world is Chinese private digital currency. There is also the astonishing growth of private digital currencies in Africa and Asia to consider, the number of active mobile money accounts globally having grown from 13 million in 2010 to more than 640 million in 2023.

Synthetics and stablecoins have many advantages over CBDCs and there are no circumstances in which one would rationally prefer a CBDC to either.