Former President Donald Trump recently made a strong statement, asserting that he would never allow the government to introduce its own digital currency. While the cryptocurrency industry may find this stance appealing, there are reasons to question whether it would become a reality, especially in a potential second Trump administration.
Trump’s opposition to a U.S. central bank digital currency, often referred to as a “digital dollar,” puts him at odds with a growing global trend. Approximately 130 countries, including members of the European Union, the U.K., and China, are actively researching or releasing their own central bank digital currencies (CBDCs), according to the Atlantic Council.
Meanwhile, the Federal Reserve in the United States is exploring various forms of CBDCs. However, the central bank officials have made it clear that they would only proceed with a CBDC if there is support from both the White House and Congress.
In New Hampshire, Trump voiced his concerns about a government-controlled digital currency, stating that it would grant the federal government absolute control over people’s money. He argued that individuals could potentially have their funds seized without even realizing it, describing it as a dangerous threat to freedom.
It is worth noting that these remarks were made at an odd time, considering that a CBDC is not currently in the immediate future. Some speculate that Trump’s position may have been influenced by former Republican presidential candidate Vivek Ramaswamy, who joined the Trump campaign as a surrogate after dropping out of the race. In an interview with Fox News, Ramaswamy revealed that he had discussed opposition to CBDCs with Trump shortly before the former president made his statement.
Central bank digital currencies can vary in terms of government surveillance and control. At one end of the spectrum, a central bank could have direct control over people’s digital wallets, manipulating the circulation of digital cash to achieve specific policy objectives. On the other hand, a CBDC could be designed to provide the same level of anonymity as traditional forms of cash.
While the crypto industry may hope for Trump’s resistance to CBDC enforcement, it remains uncertain whether this sentiment would translate into concrete actions. The future of digital currencies in the United States will likely depend on a broader consensus among policymakers and public opinion.
The Federal Reserve’s Consideration of a Central Bank Digital Currency (CBDC)
The Federal Reserve is currently in the process of exploring various systems for a potential Central Bank Digital Currency (CBDC). While no decision has been made yet, Fed officials have stated that the development of a CBDC is still years away, and they are open to receiving input from political stakeholders before proceeding.
This news has been met with mixed reactions within the crypto industry. Some members of the industry have expressed support for President Trump’s position on CBDCs, as they believe that a government-issued digital currency would directly compete with existing crypto products like stablecoins, which are typically pegged to the value of the US dollar. If the Fed were to introduce its own cryptocurrency, stablecoins might become less relevant.
Currently, the largest stablecoin in the market is Tether, which has a market value of approximately $95 billion. The second-largest stablecoin is USDC, backed by Circle Internet Financial, with a value of $25.5 billion. The potential emergence of a Fed-backed cryptocurrency could have significant implications for these stablecoins and the wider crypto industry.
However, it is important for the crypto industry to temper its expectations, as the outcome of the upcoming election could impact Securities and Exchange Commission (SEC) Chair Gary Gensler’s enforcement efforts against crypto projects and platforms. TD Cowen policy analyst Jaret Seiberg advises against assuming any immediate changes in policy, as Gensler’s term extends until June 2026, although he may choose to step down earlier.
Furthermore, it remains uncertain whether cryptocurrencies would be a priority for the Trump administration. The approach taken by the government would largely depend on the individuals appointed to key regulatory agencies such as the SEC and Commodity Futures Trading Commission. Seiberg highlights that there is no guarantee that Team Trump would want to assume the political risks associated with taking unilateral action to boost the crypto industry.
As developments unfold, it will be interesting to see how the Federal Reserve’s exploration of a CBDC progresses and how the outcome of the election shapes the regulatory landscape for cryptocurrencies.