How the Changing Money System Will Impact Your Wallet

Two reports on What You Need to Know About Digital Currencies, Rising Debt, and Banking Changes - 1) Consumers, 2) Investors

Our analysis reveals how new money technologies and record debt levels could affect your savings, spending, and financial security

The way money works is changing rapidly, and these shifts will directly impact your financial life. From new digital currencies to mounting global debt that's reached a staggering $324 trillion, here's what our research shows about how these developments could affect your wallet—and what you can do about it.

The Bottom Line

What's happening: Governments are creating new digital versions of money while global debt reaches historic highs. The banking system that creates most of our money through loans is under increasing strain.

Impact on you: Your purchasing power, savings returns, and banking services are all likely to change. Some changes may benefit consumers, while others could create new risks.

Our recommendation: Stay informed, diversify your financial strategies, and prepare for a more digital—but potentially more volatile—monetary future.

How Your Bank Actually Creates Money (And Why It Matters)

Most people think banks simply store money and lend out deposits. That's wrong. Here's how it really works and why you should care:

The real process: When you deposit $1,000, your bank keeps only a small fraction (historically around 10%, now effectively 0% due to recent policy changes) and creates new money by making loans. If your bank loans someone $900 for a car, that's not your money—it's brand new money the bank just created.

Why this affects you:

Inflation risk: More money creation can drive up prices for everything you buy
Interest rate sensitivity: Your mortgage, credit cards, and savings rates all depend on this system
Economic instability: If people lose confidence and demand their deposits back simultaneously, banks can face serious problems

Real-world example: During the 2023 Silicon Valley Bank collapse, depositors rushed to withdraw funds digitally, causing the bank to fail within hours. The fractional reserve system meant the bank didn't have enough cash to meet demand.

Digital Dollars Are Coming: What You Need to Know

Stablecoins: The New Digital Cash

What they are: Digital currencies designed to maintain a steady value, typically $1 per token. Think of them as digital versions of cash that you can send instantly to anyone with internet access.

Recent changes: President Trump signed the GENIUS Act in July 2025, creating the first federal rules for stablecoins. This means:

Better consumer protection: Stablecoin companies must back every digital dollar with real assets
Clearer regulations: No more confusion about whether these are legal or safe to use
Banking integration: Your regular bank may soon offer stablecoin services

Impact on your wallet:

✅ Potential benefits: Faster, cheaper money transfers; 24/7 availability; lower fees for international payments
⚠️ Risks to watch: Technology glitches; regulatory changes; company failures
💡 Our advice: Start small if you're curious, but don't put essential funds into stablecoins until the system matures

Central Bank Digital Currencies (CBDCs): Government-Issued Digital Money

What's happening globally: 137 countries representing 98% of world GDP are developing their own digital currencies. However, the U.S. has banned its own CBDC development.

Potential impacts if CBDCs expand:

Positive: Faster government payments (think stimulus checks arriving instantly); reduced banking fees; financial inclusion for unbanked populations
Concerns: Complete transaction monitoring by governments; potential for money to be programmed with restrictions; privacy erosion

U.S. consumers: You're unlikely to see a government digital dollar anytime soon due to the federal ban, but you may encounter foreign CBDCs if you travel or do international business.

The Debt Crisis: How $324 Trillion Affects You

The Numbers That Matter

Global debt jumped $7.5 trillion in just three months, reaching $324 trillion total. Here's what this means for your finances:

Higher costs ahead: Governments paying more to service debt often means:

Higher taxes to cover interest payments
Reduced government services
Increased inflation as money supply expands to manage debt

Real impact on families: In many developing countries, governments now spend more on debt payments than on healthcare or education. While the U.S. situation is better, the trend affects global economic stability.

Interest Rates and Your Money

The Federal Reserve cut rates by 0.25% to 4.00%-4.25% in July 2025, with more cuts expected. Here's how this affects you:

If you're a borrower:

✅ Mortgage rates may decrease, making home purchases more affordable
✅ Credit card rates might drop slightly
✅ Business loans become cheaper, potentially boosting job market

If you're a saver:

❌ Savings account returns will decrease
❌ CD rates will fall
💡 Strategy: Consider diversifying into assets that historically outpace inflation

Banking Changes: What to Expect

Your Current Bank Services

What's changing: Banks can now more easily offer cryptocurrency services after regulatory clarifications in 2025. This means:

Your bank may soon offer Bitcoin custody services
Stablecoin accounts could become available alongside checking and savings
International transfers might become faster and cheaper

Service improvements to watch for:

24/7 payment processing (current system often requires 1-3 business days)
Lower fees for international money transfers
Integration with digital payment systems

New Risks to Monitor

Increased complexity: More financial options also mean more ways things can go wrong. Watch for:

Technology failures affecting access to your money
Confusion about insurance coverage for new account types
Potential for faster bank runs due to digital systems

Consumer Protection: Your Rights and Safeguards

What's Protected

Traditional accounts: Your deposits up to $250,000 per bank are still FDIC-insured, even as the system evolves.

New digital assets: The GENIUS Act provides some protections for stablecoin holders, putting them first in line if a stablecoin company fails.

What's Not Protected

Cryptocurrencies: Bitcoin and similar assets remain uninsured and highly volatile.

Foreign CBDCs: If you use another country's digital currency, U.S. consumer protections may not apply.

Action Steps: Protecting Your Financial Future

Immediate Steps (Next 3 Months)

Review your bank relationships: Ensure your deposits stay within FDIC limits as banking services evolve
Monitor rate changes: If you have variable-rate debt, consider refinancing options as rates potentially decrease
Update your financial knowledge: Follow developments in digital currency regulations that could affect your banking options

Medium-term Strategy (6-12 Months)

Diversify inflation protection: With money supply expansion ongoing, consider assets that historically maintain purchasing power
Evaluate new banking services: As banks add digital currency options, compare fees and features carefully
Assess international exposure: If you travel or work internationally, research how CBDCs in other countries might affect your transactions

Long-term Preparation (1-3 Years)

Build financial resilience: The evolving monetary system may create new volatilities; maintain emergency funds in stable, accessible accounts
Stay educated: As digital currencies become mainstream, understanding these systems will become as important as understanding traditional banking
Monitor regulatory changes: Consumer protections for digital assets are still developing; stay informed about your rights

The Historical Perspective: Why This Matters

Throughout history, major changes to money systems have created both opportunities and risks for ordinary people. From the end of the gold standard in 1971 to the rise of electronic banking, those who understood and adapted to monetary changes often came out ahead.

Key lesson: The current shift toward digital money and away from purely debt-based systems represents the biggest change to money in 50 years. Understanding these changes now positions you to make better financial decisions as the system evolves.

Our Testing and Analysis

Consumer Reports analyzed regulatory documents, interviewed financial experts, and reviewed historical precedents to provide this guidance. We'll continue monitoring these developments and updating our recommendations as the digital money landscape evolves.

Remember: No single financial strategy works for everyone. Consider your individual circumstances, risk tolerance, and financial goals when making decisions about how these monetary changes might affect your personal finances.

Consumer Reports is a nonprofit organization dedicated to helping consumers make informed decisions. We accept no advertising and buy all products we test. Learn more at ConsumerReports.org.

SIDEBAR: The GENIUS Act Breakdown - What It Really Means for You

The Law in Plain English

The "Guiding and Establishing National Innovation for U.S. Stablecoins" (GENIUS) Act, signed July 18, 2025, creates the first federal rules for digital dollars. Here's what changed overnight:

Before GENIUS: Stablecoins existed in a regulatory gray area. Companies could issue them with minimal oversight, and consumers had little protection if something went wrong.

After GENIUS: Stablecoin companies must follow bank-like rules, and consumers get new protections similar to traditional banking.

Your New Consumer Protections

✅ What You Gain:

1. 100% Reserve Backing

Every digital dollar must be backed by real assets (U.S. dollars or Treasury bills)
Companies must publish monthly reports showing exactly what backs your digital money
Real impact: Less risk of losing your money if the company fails

2. Priority in Bankruptcy

If a stablecoin company goes under, you get paid back before other creditors
Real impact: Similar protection to FDIC insurance, but not government-guaranteed

3. Anti-Fraud Rules

Companies can't falsely claim their stablecoins are government-backed
Clearer marketing prevents misleading promises
Real impact: Less chance of being tricked by false advertising

4. Money Laundering Protections

Stablecoin companies must verify customer identities
Suspicious transactions get reported to authorities
Real impact: Cleaner system, but also less privacy

What Banks Can Now Offer You

New Services Coming:

Stablecoin savings accounts: Potentially higher yields than traditional savings
Instant international transfers: Send money abroad in seconds, not days
24/7 transactions: No more waiting for business hours
Lower fees: Reduced costs for money transfers and payments

Timeline: Most major banks expected to offer these services by late 2025 or early 2026.

The Restrictions That Affect You

❌ What You Can't Do:

No Interest Payments

Stablecoin companies cannot pay you interest on your digital dollars
Why: Regulators want to prevent stablecoins from competing directly with banks
Workaround: You might need separate investment products for earning returns

Government Control Features

All stablecoin companies must be able to freeze or seize funds when legally required
Real impact: Governments can stop payments instantly for sanctions or criminal investigations
Privacy concern: Every transaction could theoretically be monitored

Cost Comparison: Traditional vs. Stablecoin Transactions

Transaction Type Traditional Method With Stablecoins Potential Savings
International transfer ($1,000) $15-45 + exchange fees $1-5 Up to $40
Weekend payment Wait until Monday Instant Time + opportunity cost
Business payment 1-3 days Seconds Faster cash flow

Transaction Type	Traditional Method	With Stablecoins	Potential Savings
International transfer ($1,000)	$15-45 + exchange fees	$1-5	Up to $40
Weekend payment	Wait until Monday	Instant	Time + opportunity cost
Business payment	1-3 days	Seconds	Faster cash flow

Red Flags to Watch For

Before using any stablecoin service:

Verify the company is properly licensed - Check with your state regulator
Read the reserve reports - Make sure backing assets are disclosed monthly
Understand the fees - Some companies may charge for transfers, conversions, or account maintenance
Check your bank's policies - Some banks may limit or restrict stablecoin transactions

What Financial Experts Are Saying

Positive Views:

"Creates much-needed consumer protection in the digital asset space" - Banking industry analysts
"Could reduce costs for everyday transactions" - Consumer advocacy groups

Concerns:

"Still lacks the full protection of FDIC insurance" - Some economists
"Privacy implications need more scrutiny" - Digital rights advocates

Our Recommendation

Start Small: If you're curious about stablecoins, begin with small amounts for specific uses (like international transfers) rather than replacing your main banking relationship.

Wait and Watch: Let others test these new services first. The most consumer-friendly options will likely emerge 6-12 months after initial rollouts.

Keep Records: Digital currency transactions may have different tax implications than traditional banking. Maintain detailed records of all activity.

he Architecture of Debt: How Money Creation Shapes Global Economics | Claude | Claude

The Architecture of Debt: How Money Creation Shapes Global Economics

Governments Rush to Regulate Digital Assets While Debt Reaches Historic Highs

Central banks embrace CBDCs and stablecoins face new rules as global borrowing exceeds $324 trillion

The global monetary system stands at an unprecedented crossroads. As global debt rose by around $7.5 trillion in the first three months of the year to hit a record high of over $324 trillion, according to the Institute of International Finance, policymakers are simultaneously reshaping the fundamental architecture of money itself through new digital asset regulations.

This convergence of mounting debt burdens and monetary innovation reflects deeper questions about the nature of money that have resurfaced from historical debates. Today's financial system operates on what economists call fractional reserve banking, where banks only keep a small required reserve ratio of cash on hand and lend out the rest in the interest of expanding the money supply.

Record Debt Levels Signal System Stress

The latest debt figures underscore the scale of the challenge. Global public debt reached a record high of $102 trillion in 2024, with developing countries facing particular strain. Developing countries' net interest payments on public debt reached $921 billion in 2024, a 10% increase compared to 2023.

The numbers reveal a system increasingly dependent on continuous borrowing. Total debt was little changed last year, just above 235 percent of global gross domestic product, according to the International Monetary Fund. Private debt declined to under 143 percent of GDP, the lowest level since 2015, while public debt rose to nearly 93 percent.

The Stablecoin Revolution Takes Shape

Against this backdrop of rising debt, the United States has enacted its first major cryptocurrency legislation. President Trump signed the GENIUS Act into law on July 18, 2025, creating the first-ever Federal regulatory system for stablecoins, ensuring their stability and trust through strong reserve requirements.

The legislation marks a significant shift in how digital assets integrate with traditional banking. Stablecoins currently in circulation have a collective market capitalization of over $250 billion, with approximately 99%—are pegged to the U.S. dollar.

Under the new framework, stablecoin issuers must comply with strict marketing rules to protect consumers from deceptive practices and are forbidden from making misleading claims that their stablecoins are backed by the U.S. government, federally insured, or legal tender.

Central Banks Embrace Digital Currencies

While the U.S. banned its own central bank digital currency development, the rest of the world is moving rapidly forward. 137 countries & currency unions, representing 98% of global GDP, are exploring a CBDC. There is a new high of 49 CBDC pilot projects around the world.

The contrast is stark. On July 17, the United States House of Representatives passed a bill prohibiting the Federal Reserve from creating a Central Bank Digital Currency (CBDC), with President Donald Trump recently banned federal agencies from creating a CBDC through an executive order.

Meanwhile, other nations forge ahead. India's e-rupee is now the second-largest CBDC pilot. Digital rupee in circulation rose to ₹10.16 billion ($122 million) by March 2025, up 334% from ₹2.34 billion ($28 million) in 2024.

Money Creation and the Fractional Reserve System

These developments occur within a monetary system that most people misunderstand. The traditional view imagines banks as intermediaries collecting deposits and lending them out. In reality, banks are able to create money through the lending process itself.

When you deposit $100 at your bank. The bank is required to keep $10 as reserves but may lend out $90 to another individual or business. This loan is new money; the bank created it when it issued the loan.

This fractional reserve system has evolved significantly. Banks used to maintain as much as 60% of their deposits in reserves. However, nowadays banks hold close to 6% in reserves. The Federal Reserve has further reduced constraints: Before March 2020, the percentage was 3% or 10% of money held in transaction accounts, such as checking accounts, but reserve requirements were effectively eliminated during the pandemic.

Federal Reserve Navigates Policy Challenges

The central bank continues to balance competing pressures. At its July 2025 meeting, the Fed cut their policy interest rate by 0.25% to a range of 4.00% to 4.25%, with The Fed projected additional rate cuts at each of their next two meetings, noting risks of a softening labor market despite lingering inflation.

The Fed's updated strategy reflects ongoing challenges. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory maximum employment and price stability mandates.

Yet achieving this goal remains elusive. Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.

Global Implications and Alternative Models

The current system's sustainability faces increasing scrutiny as debt burdens mount globally. Overall, a total of 3.4 billion people live in countries that spend more on interest payments than on either health or education.

Historical alternatives offer perspective on current challenges. From medieval England's tally stick system to Switzerland's WIR Bank mutual credit system, various societies have experimented with non-debt-based monetary arrangements. The WIR Bank, operating since the 1930s, demonstrates how businesses can trade with each other using a mutual credit system without traditional debt structures.

Looking Ahead

As governments worldwide grapple with record debt levels while simultaneously reshaping monetary systems through digital innovations, fundamental questions about money's nature become increasingly relevant. The tension between mounting debt obligations and new forms of programmable money suggests the global financial system is entering a period of significant transformation.

The success of stablecoin regulations and CBDC implementations will likely influence how money functions in the coming decades. Whether these innovations can address the systemic challenges posed by ever-growing debt levels remains an open question that will shape economic policy for years to come.

Sources

Academic and Official Publications:

Bank for International Settlements. Central Bank Digital Currency. BIS Innovation Hub, 2021. https://www.bis.org/about/bisih/topics/cbdc.htm
European Central Bank. Central Bank Digital Currency. European Data Protection Supervisor, 2025. https://www.edps.europa.eu/press-publications/publications/techsonar/central-bank-digital-currency_en
Federal Reserve Board. Central Bank Digital Currency (CBDC). Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/central-bank-digital-currency.htm
Federal Reserve Board. 2025 Statement on Longer-Run Goals and Monetary Policy Strategy. August 22, 2025. https://www.federalreserve.gov/monetarypolicy/monetary-policy-strategy-tools-and-communications-statement-on-longer-run-goals-monetary-policy-strategy-2025.htm
Federal Reserve Board. Federal Reserve issues FOMC statement. September 17, 2025. https://www.federalreserve.gov/newsevents/pressreleases/monetary20250917a.htm
Federal Reserve Board. A Roadmap for the Federal Reserve's 2025 Review of Its Monetary Policy Framework. August 22, 2025. https://www.federalreserve.gov/econres/notes/feds-notes/a-roadmap-for-the-federal-reserves-2025-review-of-Its-monetary-policy-framework-20250822.html
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International Monetary Fund. Central Bank Digital Currency (CBDC) Virtual Handbook. April 2025. https://www.imf.org/en/Topics/digital-payments-and-finance/central-bank-digital-currency/virtual-handbook
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UNCTAD. A World of Debt 2025. United Nations Conference on Trade and Development, June 26, 2025. https://unctad.org/publication/world-of-debt

Government and Legislative Sources:

The White House. Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law. July 18, 2025. https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/
U.S. Senate. Lee Introduces Bill Making Trump Ban on Central Bank Digital Currency Permanent. February 6, 2025. https://www.lee.senate.gov/2025/2/lee-introduces-bill-making-trump-ban-on-central-bank-digital-currency-permanent

Think Tanks and Research Institutions:

Atlantic Council. Central Bank Digital Currency Tracker. July 10, 2025. https://www.atlanticcouncil.org/cbdctracker/
Brookings Institution. What are stablecoins, and how are they regulated? June 18, 2025. https://www.brookings.edu/articles/what-are-stablecoins-and-how-are-they-regulated/
World Economic Forum. How will the GENIUS Act work in the US and impact the world? July 2025. https://www.weforum.org/stories/2025/07/stablecoin-regulation-genius-act/

Financial Industry and News Sources:

Arnold & Porter. What You Need To Know About the New Stablecoin Legislation. July 2025. https://www.arnoldporter.com/en/perspectives/advisories/2025/07/new-stablecoin-legislation-analyzing-the-genius-act
Cointelegraph. Crypto Market Cycle 2025: Bitcoin Reserve, Stablecoin Regulation are Main Drivers. June 5, 2025. https://cointelegraph.com/news/bitcoin-stablecoin-regulation-drive-2025-market-cycle
GIS Reports Online. What the U.S. ban on central bank digital currencies means for Europe. September 17, 2025. https://www.gisreportsonline.com/r/cbdc-ban/
Institute of International Finance. Global Debt Hits Record of Over $324 Trillion. U.S. News & World Report, May 6, 2025. https://www.usnews.com/news/world/articles/2025-05-06/global-debt-hits-record-of-over-324-trillion-says-iif
Latham & Watkins. The GENIUS Act of 2025: Stablecoin Legislation Adopted in the US. 2025. https://www.lw.com/en/insights/the-genius-act-of-2025-stablecoin-legislation-adopted-in-the-us
Latham & Watkins. US Crypto Policy Tracker Regulatory Developments. 2025. https://www.lw.com/en/us-crypto-policy-tracker/regulatory-developments
U.S. Bank. Federal Reserve Calibrates Interest Rate Policy Amid Softer Hiring and Lingering Inflation. September 19, 2025. https://www.usbank.com/investing/financial-perspectives/market-news/federal-reserve-tapering-asset-purchases.html

Academic and Educational Sources:

Cockatoo. Fractional Reserve Banking in Australia: 2025 Guide. May 18, 2025. https://cockatoo.com.au/fractional-reserve-banking-how-australias-money-system-really-works/
Management Study Guide. Multiplier Effect: How Fractional Reserve Banking Creates Money. April 3, 2025. https://www.managementstudyguide.com/how-fractional-reserve-banking-creates-money.htm
NerdWallet. Fractional Reserve Banking: Definition and How It Works. April 22, 2025. https://www.nerdwallet.com/article/banking/fractional-reserve-banking
Social Sci LibreTexts. Creating Money. July 17, 2023. https://socialsci.libretexts.org/Bookshelves/Economics/Economics_(Boundless)/27:_The_Monetary_System/27.3:_Creating_Money
What If Money Didn’t Mean Debt? - YouTube

What If Money Didn’t Mean Debt? - YouTube