by Jude Ayua
US President Trump’s Digital Financial Technology executive order, signed 23 January 2025, bans government agencies central bank digital currencies (CBDCs) within and outside the country.
“Except to the extent required by law, agencies are hereby prohibited from undertaking any action to establish, issue, or promote CBDCs within the jurisdiction of the United States or abroad.”
The order directs the immediate termination of ongoing plans or initiatives at any agency related to the creation of a CBDC within the United States. There shall also be no further actions to develop or implement such plans or initiatives. The order defines CBDC 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.”
Read also: President Trump revokes Biden’s Crypto Executive Order.
Why a ban on CBDCs?
Key industry stakeholders have opposed the idea of a US-issued CBDC. The opposition mainly stems from the fear that CBDCs, by their nature, are a threat to citizens’ privacy. For pro-crypto advocates, there is also the belief that CBDCs conflict with the idea behind decentralized finance (DeFi) which essentially is to empower private citizens. US legislators have also strongly opposed a US-issued CBDC.
In February 2024, five US senators, led by Senator Ted Cruz, introduced a bill, the “CBDC Anti-Surveillance State Act,” to prohibit the Federal Reserve from issuing a digital. This bill raised concerns about potential government overreach and privacy violations associated with a digital dollar. The senators argued that a CBDC could be used for extensive surveillance of citizens’ spending habits and potentially even restrict access to funds. The bill exempted any “dollar-denominated currency that is open, permissionless, and private, and fully preserves the privacy protections” of US currency. In May 2024, the House of Representatives passed the CBDC Anti-Surveillance State Act banning the Federal Reserve from creating the “digital dollar.” The President’s ban on CBDCs suggests his alignment with the industry belief that the privacy of citizens must not be compromised.
The new executive order proposes the development of US Dollar-backed stablecoins, as long as they do not violate citizenship privacy. President Trump promised during his campaign to establish a national bitcoin reserve. However, a few days before his inauguration, Trump announced the potential establishment of an “America-first” crypto reserve, prioritizing American-founded crypto assets, including Solana (SOL), Ripple (XRP), and USD Coin (USDC). This is consistent with the “America-first” mantra of the new administration.
Read also: Trump’s ‘America-first’ crypto reserve: What happens to bitcoin?
US CBDC projects
The US Federal Reserve during the Biden Administration showed interest in developing a CBDC. State Federal Reserve Banks, including those in New York and Boston, also developed CBDC prototypes for wholesale and retail applications.
In 2024, US Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell reaffirmed the United States’ interest in a digital dollar. Secretary Yellen said at the NYTimes Dealbook Conference, in response to the Atlantic Council’s CBDC tracker: “I think it [the digital dollar] could result in faster, safer, and cheaper payments, which I think are important goals.” During an appearance before the Senate Banking Committee, Powell stated, “We are looking carefully, very carefully at the question of whether we should issue a digital dollar.”
Trump’s new executive order has now put an end to the idea of a digital dollar. The Federal Reserve and Treasury can focus on developing policies and regulations that align with the Trump administration’s digital assets agenda, to drive adoption and consumer protection.
Read also: Trump’s Executive Order on Digital Assets: Policy Implications
Image source: AdobeStock
Jude Ayua is a policy analyst at CAB. A lawyer, Jude is an associate at Infusion Lawyers where he is a member of the Blockchain & Virtual Assets Group. He is also a member of the Policy & Regulations Committee of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). Jude reports and writes on crypto policy and regulations. jude@infusionlawyers.com
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