The Trump Administration's Ban on Central Bank Digital Currency

Since Donald Trump occupied the Oval Office for the second time on January 20th, 2025, he has signed a significant number of Executive Orders covering a very wide range of issues.  As someone who has been following the development of digital currencies for many years, one Executive Order that caught my eye was "Strengthening American Leadership in Digital Financial Technology" which was signed on January 25th, 2025:

Inside this executive order, we find this under section 1 (v) (my bolds throughout):

 

"...taking measures to protect Americans from the risks of Central Bank Digital Currencies (CBDCs), which threaten the stability of the financial system, individual privacy, and the sovereignty of the United States, including by prohibiting the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States."

 

The Executive Order defines Central Bank Digital Currencies 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."

 

In Section 5, we find this:

 

"a)  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.

 

(b)  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."

 

It is important to note that the Federal Reserve is not an agency of the United States federal government and that it exists because of an act of Congress. According to the Fed, it 

"...enjoys a unique public/private structure that operates within the government, but is still relatively independent of government to isolate the Fed from day-to-day political pressures in fulfilling its varying roles. As stated in The Federal Reserve System Purposes & Functions:

The Federal Reserve System is considered to be an independent central bank. It is so, however, only in the sense that its decisions do not have to be ratified by the President or anyone else in the executive branch of the government. The entire System is subject to oversight by the U.S. Congress….the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government."

  

While this particular Executive Order isn't as attention-grabbing as the Executive Orders that covered issues like America's withdrawal from the World Health Organization and ending DEI programs, to those of us that have been paying attention to the unceasing movement toward global adoption of central bank digital currencies, this could be a game-changer.  In my opinion and in light of this development, there could be one of two scenarios that play out:

 

1.) with the American economy being the largest economy in the world, Washington's ban on central bank digital currencies could slow up adoption of CBDCs by other economies.

 

2.) the creation of a crisis in the world's financial markets which could be used to negate the Trump Administration's ban on CBDCs, all in the name of rescuing the global economy.

 

In any case and until proven otherwise, I think that the Trump Administration's ban on CBDCs has done all of us a great (and perhaps temporary favour) by preventing the world's most influential central bank from issuing a Central Bank Digital Currency within the jurisdiction of the world's largest economy.  You can just imagine central bankers' heads exploding all over the world thanks to this development.