President Donald Trump has issued an executive order on Thursday effectively banning the creation and use of a central bank digital currency (CBDC) in the United States. The order underscores Trump’s stance against the potential risks associated with CBDCs, which he argues could undermine financial stability, individual privacy, and national sovereignty.
Trump’s order prohibits “the establishment, issuance, circulation, and use” of any CBDC within U.S. jurisdiction. The decision represents a clear shift away from the exploration of digital dollars, an idea promoted by the Biden administration during its tenure.
The Biden administration had tasked the Federal Reserve with researching the feasibility of a CBDC, citing potential benefits such as increased financial inclusion for the unbanked and enhanced tools for combating financial crimes.
However, critics have raised concerns about CBDCs, including potential privacy infringements and the risk of disrupting the traditional banking system by reducing the role of private financial institutions.
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Proponents of CBDCs argue that they could modernize the financial system by providing a secure, government-backed alternative to cryptocurrencies and by offering greater financial accessibility to underserved populations.
Critics, on the other hand, see CBDCs as a double-edged sword. Congressional Republicans, in particular, have long warned that CBDCs could grant the government unprecedented control over personal financial transactions, potentially leading to privacy violations and eroding trust in the financial system.
Even as the debate continues, Federal Reserve Chair Jerome Powell has repeatedly assured lawmakers that the Fed is not moving toward the issuance of a CBDC.
Speaking to the Senate Banking Committee last year, Powell said, “People don’t need to worry about a central bank digital currency. Nothing like that is remotely close to happening anytime soon.”
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