Donald Trump Bans CBDC, Keeping His Pledge To The Cryptocurrency Community: What Does This Mean?

Doland Trump US President

In favour of a digital ecosystem driven by the private sector, the most recent presidential order prohibits CBDC.

An executive order signed by US President Donald Trump prohibits the development and issuance of Central Bank Digital Currency (CBDC) in the US. Trump has occasionally insisted in the lead-up to his presidential campaign that one of his post-election goals would be to outlaw CBDC. In terms of bitcoin and cryptocurrencies, this is Trump’s first significant action during his second term in office. “A form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank” is the definition of CBDC given in the order.

The most recent executive order opposes the implementation of CBDC, citing concerns about financial stability, privacy, and sovereignty. As an alternative to CBDCs, it promotes a more comprehensive digital asset ecosystem driven by the private sector, with a focus on dollar-backed stablecoins.

Agencies are forbidden from taking any action to create, issue, or advertise CBDCs, either domestically or internationally, in accordance with Trump’s directive. They can only comply if mandated by law. According to the order, “any ongoing plans or initiatives at any agency related to the creation of a CBDC within the jurisdiction of the United States shall be immediately terminated, and no further actions may be taken to develop or implement such plans or initiatives, except to the extent required by law,” it stated.

Additionally, the definition of digital assets established by Trump’s directive includes now any digital value that is listed on a distributed ledger, including tokens, stablecoins, and cryptocurrencies like Bitcoin. Given that Trump previously pledged to create a national Bitcoin reserve using government-seized assets, the presumed stockpiling might be concentrated on Bitcoin. According to reports, the US currently owns 198,109 Bitcoin, worth $20.1 billion.

Trump has fulfilled his pledges made during the campaign on Bitcoin. Additionally, he has fully and unconditionally pardoned Ross Ulbricht, the founder of Silk Road and the pioneer of Bitcoin. Thus far, all of this is consistent with his pledges to establish a council, prohibit CBDC, and establish a strategic Bitcoin reserve, among other things.

What does this signify for CBDC?

A digital currency issued by a nation’s central bank is known as a CBDC. Although it could look like cryptocurrencies, the central bank determines its value, which is comparable to the fiat (official) money of that nation. A number of nations have introduced CBDCs in recent years in an effort to move towards digital currencies. In essence, CBDCs denote centralised authority. Trump’s directive demonstrates a preference for decentralised private-sector solutions over centralised control, which is embodied by CBDC.

Trump’s order demonstrates a strong stance against digital currencies administered by central banks by ruling out the prospect of a US CBDC in the near future. By encouraging the expansion of legal and authentic dollar-backed stablecoins across the globe, the directive essentially supports stablecoins. In other words, stablecoins could maintain the digital economy without direct government issuance by acting as a private-sector substitute for CBDCs. By doing this, the emphasis moves from government-run CBDCs to digital assets in the private sector, while also guaranteeing the dollar’s hegemony in the global economy through stablecoins and other crypto developments. All things considered, this halts any previous foundation established for the US CBDC and focusses all efforts on regulating and fostering the development of digital assets in the private sector.

The United States’ decision to use private-sector solutions rather than government-issued digital currencies to preserve its influence on the world stage may put countries that have been supporting CBDCs in a competitive position. China, Brazil, South Korea, and the United Arab Emirates are reportedly creating CBDCs as of November 2023. Sweden, Nigeria, and the Bahamas have already created their own CBDCs.

The most recent action also marks a change that will increase the credibility and uptake of cryptocurrencies like Bitcoin. But there are drawbacks as well, particularly for the decentralisation tenets and ecosystem stability. The ecosystem will depend on finding a balance between the government’s engagement and the openness and independence of cryptocurrency.

Leave a Reply

Your email address will not be published. Required fields are marked *