Trump’s executive order has banned the creation and use of Central Bank Digital Currencies CBDCs in the U.S. Industry watchdogs say that the decision may influence global CBDC projects. However, industry leaders believe it could impact countries looking into developing CBDCs.
During his presidential campaign, Trump maintained that banning CBDC would be one of his agendas after assuming office. This order defines CBDC as a direct liability of the central bank denominated in the national unit of account and a form of digital money or monetary value.
Many people in the crypto market are happy about this decision because the Trump government is putting them first. To the crypto industry, this marks the initial significant action regarding crypto and Bitcoin during his second term in office.
Research shows that 134 countries are exploring CBDCs. In fact, the late 2024 figures indicate that all G20 countries are looking into CBDCs. 44 countries are currently testing digital currencies. Jurisdictions like the EU also have good reasons to keep building wholesale CBDCs.
Some anti-CBDC opinions in the US have been influenced by privacy concerns. Still, the European Central Bank (ECB) is expected to make a decision on the implementation of a CBDC in late 2025. It intends to resolve privacy and security concerns through using several techniques. Some of them include data encryption and hashing to prevent the establishment of connections between transactions and specific users.
Globally, the U.S.’s decision to maintain the dollar’s influence through private-sector solutions rather than government-issued digital currencies may result in a competitive situation. Countries that have been promoting CBDCs include China, Brazil, South Korea, and the UAE as of November 2023. The CBDCs of the Bahamas, Nigeria, and Sweden have already been established.
What does it mean for the US government to set aside CBDCs?
For status, the executive order claims to be against adopting CBDC because of concerns about privacy, control, and financial security. It supports a stronger digital asset system led by private companies, focusing on dollar-backed stablecoins as an option.
Trump’s order makes it unlikely that the US will have a digital currency run by the central bank during his tenure. The order encourages the use of stablecoins by helping the development of legal dollar-backed stablecoins around the world.
This means that stablecoins could be a private option instead of government-issued digital currencies. This will help the digital economy grow without direct government involvement.
Now, the attention is moving from government-controlled digital currencies to private-sector digital assets. This change will help keep the dollar as the main currency in the global economy through stablecoins and other crypto developments.
Moreover, this stops any previous attempts to create a US digital currency. This means that the focus is on regulating and helping private companies develop digital assets.
On the other hand, it poses challenges, especially to the principles of decentralization and the stability of the ecosystem. Striking a balance between government involvement in Crypto’s principle of openness and independence will be critical to the ecosystem.
Trump reaffirms Bitcoin as a strategic reserve
According to reports, the US holds 198,109 Bitcoin, which translates to $20.1 billion. Therefore, the assumed stockpile may focus on Bitcoin, as Trump had in the past promised a national Bitcoin reserve using government-seized assets.
Besides, Trump’s order has defined digital assets. Moving forward, any digital value recorded on a distributed ledger includes crypto coins such as Bitcoins, tokens, and stablecoins.
In addition, the executive order creates a presidential working group responsible for creating a federal regulatory framework for digital assets such as stablecoins. This group will discuss market structure, consumer protection, supervision, and risk management.
It will also evaluate the viability of establishing a national assets stockpile. It is likely to be derived from crypto coins that have been seized by law enforcement. Clearly, the crypto industry was right to trust Trump.
