Last week in the United States, President Donald Trump made history by signing the first executive order related to digital assets in that country, establishing a ban on central bank digital currencies (CBDC).
As reported by NoticiasVE, the 78-year-old president signed the executive order “Strengthening American leadership in digital financial technology” on January 23.
This executive order covers different topics, such as the possible creation of a strategic reserve of digital assets. But specifically, in article 5, The order establishes a ban on CBDCs.
CBDCs, or central bank digital currencies, are digital versions of fiat currency issued and backed by a central bank. This implies that the monetary policy of these assets is at the mercy of those entitiesbeing as prone to inflation and devaluation as its physical pair
Protect Americans
The main reason Trump ordered his ban is protecting Americans given the risks posed by CBDCs. According to what the Trump Administration thinks, these digital currencies threaten the stability of the financial system, individual privacy, and the sovereignty of the United States.
The regulations prohibit the establishment, issuance, circulation and use of a CBDC within the jurisdiction of the United States.
The ban on CBDCs by the Trump government adds to the skepticism that the United States Federal Reserve (Fed) itself has had, an entity that has already expressed doubts about the benefits of the digital dollar, as reported by this medium.
Moving away from the majority
With this ban, the possibility of the United States joining the significant number of countries and regions that are already developing their own CBDCs is ruled out.
These include the European Union, with its digital euro, which was recently defended by several lawmakers. There is also China, with its digital yuan; Bahamas, with the Sand Dollar; Nigeria, with its e-Naira and Sweden, with the digital crown. At a global level, more than 120 countries are working on their own CBDCsaccording to the Atlantic Council organization, which shows how these projects have gradually proliferated.
CBDCs pose risks to people’s financial freedom and privacy. Being under the direct control of central banks, they allow a level of surveillance and control over individual transactions that it didn’t exist with cash. This carries the possibility that authorities can monitor, limit or even block transactions from any individual, under certain circumstances.
There are studies that certify these risks. For example, a report prepared by developer Pedro Magalhães, from the company Iora Labs in Brazil, determined that, with the CBDC, in this case that of the Brazilian real, now called Drex, the central bank will be able to activate and deactivate the wallets digital of the platform’s users, as reported by NoticiasVE. This reflects a capacity for control which many consider invasive of privacy and financial autonomy.
And in general, CBDCs are the antithesis of bitcoin and cryptocurrencies, that offer financial freedom and privacy.
The ban on CBDCs in the United States will bring with it a series of implications, such as the fact that the ability of government agencies to manage digital monetary policies associated with the dollar will now be limited. This is a scenario that would enhance the importance of US dollar-based stablecoins, such as Tether’s USDT; or USDC, from Circle.
Trump’s decision to ban CBDCs reflects a clear stance in favor of protecting the privacy and financial sovereignty of American citizens, although it also poses challenges and opportunities for the future of the digital financial ecosystem in the country.
Furthermore, the executive order not only marks a milestone in digital asset regulation policy in the United States, but also positions the country on a different path than many other nations are taking in the development of their digital monetary systems.