US President Donald Trump has banned the creation and issuance of Central Bank Digital Currency (CBDC) in the United States.
While campaigning for the US Presidential Elections, Trump had often mentioned banning CBDC once he entered the office.
The executive order banning CBDC defines it as “a form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank.”
The order cites concerns such as risks related to privacy, sovereignty, and financial stability over using CBDC. As an alternative to CBDCs, the order seeks a stronger, private-sector-led digital asset ecosystem with special emphasis on dollar-backed stablecoins.
The agencies are now prohibited from taking action to issue or promote CBDCs in the US and abroad. CBDCs can be issued only if required by the law.
“Except to the extent required by law, 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,” the order said.
What does the order mean?
Terminating the use of CBDC is Donald Trump’s first move towards cryptocurrency in his second term as the US President.
A CBDC is a type of digital currency, similar to cryptocurrency issued by a central bank. Its value is fixed by the central bank, unlike cryptocurrency. Several countries have implemented CDCs in recent years to transition into digital currency under centralised control.
However, Donald Trump’s latest move reflects resistance to centralised control achieved through CBDC against decentralised cryptocurrencies.
The order highlights a strong position against control by central banks. It promotes the growth of lawful and legitimate dollar-backed stablecoins worldwide, which could be used as a private-sector alternative to CBDCs.
Stablecoins are another form of cryptocurrency that maintains a stable value pegged to an asset, which is typically a fiat currency, such as the US dollar, or the price of a commodity, such as gold. Trump’s move to promote stablecoins will promote digital currencies in the economy without the interference of the government. This will also ensure the dominance of dollars through stablecoins and other cryptocurrencies.
Additionally, the executive order has declared that a Presidential working group will be formed to develop a federal regulatory framework for digital assets. The working group will also examine market structure, consumer protection, and risk management and plan to create a national assets stockpile.
