Global CBDC Development Faces Setbacks After Trump’s Ban on Digital Currencies in the US
The global trajectory of Central Bank Digital Currencies (CBDCs) has hit a significant roadblock following a bold move by US President Donald Trump. On January 23, Trump signed an executive order officially banning the establishment, issuance, and circulation of CBDCs within the United States. While celebrated by parts of the crypto community, the decision has sparked debate about its potential ripple effects on global CBDC initiatives.
Retail vs. Wholesale CBDCs: A Diverging Path Forward
CBDCs, designed as digital currencies issued by central banks, aim to enhance payment system efficiency and financial inclusion. These projects are generally divided into two categories:
- Retail CBDCs: Designed for use by the general public to replace cash or supplement payment systems.
- Wholesale CBDCs: Tailored for interbank payments and securities transactions, primarily catering to institutional use.
Trump’s ban is expected to stall retail CBDC development in the US for at least four years, according to Yifan He, founder of Chinese blockchain firm Red Date Technology. “I don’t think any country can even develop a real retail CBDC in the next ten years,” He told Cointelegraph, citing technical hurdles and a lack of viable solutions.
Wholesale CBDCs: An Alternative to US-Dominated Financial Systems
While retail CBDCs may face delays, wholesale CBDC initiatives could gain momentum as an alternative to the US-controlled financial system, said Lambis Dionysopoulos of the EU Blockchain Observatory and Forum.
“Wholesale CBDCs are being considered more seriously than ever before,” Dionysopoulos noted, highlighting their potential to reduce dependency on US-dominated payment infrastructures. Countries like Russia and regions such as Europe have expressed concerns over their reliance on US systems, particularly in light of the geopolitical risks associated with such dependence.
Christine Lagarde, President of the European Central Bank, emphasized that a digital euro is essential for autonomy and security in Europe, reinforcing the strategic importance of CBDCs. Trump’s move, combined with his stance on trade and tax wars, could push other nations—particularly those viewed unfavorably by the US—to accelerate wholesale and cross-border CBDC development.
Industry Reactions to Trump’s CBDC Ban
The ban has polarized opinions within the financial and blockchain communities. Some experts argue that CBDCs were flawed from the beginning, while others believe global development efforts will persist.
Tomer Warschauer Nuni of Kima Network noted that countries like China, Israel, Australia, and the European Union remain steadfast in their commitment to CBDCs. These nations view CBDCs as tools to enhance payment systems and assert monetary sovereignty.
- The European Union is expected to double down on its commitment to the digital euro as part of its efforts to reduce reliance on non-European payment infrastructure.
- Warschauer highlighted the need for interoperability between centralized and decentralized financial ecosystems, stating, “This is an opportunity to build the bridges necessary for a thriving global financial system, regardless of regional policies.”
What’s Next for CBDC Development?
Despite Trump’s executive order, the global CBDC conversation is far from over. Major players like the Bank for International Settlements (BIS) and Ripple, a key contributor to CBDC technology worldwide, declined to comment on the implications of the ban. However, momentum appears to be shifting toward wholesale CBDC projects, especially in regions seeking strategic financial autonomy.
The US ban may have slowed retail CBDC adoption domestically, but globally, the race to develop innovative digital currencies continues. As nations prioritize financial independence and security, CBDCs remain a critical piece of the evolving monetary landscape.
Related: Trump’s Treasury Secretary pick opposes US CBDC development.
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Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Readers are encouraged to conduct their own research before making any decisions.
