Trump's CBDC Ban: What It Means for the Dollar's Global Dominance

By Wolf Street Economics

Serious Economics. No Hype. Just Signals.


Introduction

The future of money is no longer hypothetical; it's happening, now. Over 100 countries are actively researching or deploying Central Bank Digital Currencies (CBDCs). These state-backed digital assets are reshaping payments, cross-border trade, and financial sovereignty.

But, in a sweeping move earlier this year, U.S. President Donald Trump signed an executive order banning the development of a digital dollar. Supporters framed it as a defence of liberty. Critics say it's a self-inflicted wound that could compromise America's financial leadership.

So, what does this decision really mean: for the U.S. economy, for the dollar, and for America's place in the world?

Let's break it down.


What the Ban Does

On 23 January 2025, Donald Trump issued an executive order that:

  • Prohibits the Federal Reserve and Treasury from launching or developing a Central Bank Digital Currency.
  • Establishes a digital asset working group to monitor innovation in stablecoins and crypto.
  • Cites privacy concerns and potential for government overreach as the primary concern.
While framed as a civil liberties protection, the order effectively removes the U.S. from the CBDC race, at a time when other powers are accelerating.


The Rest of the World Is Not Waiting

Let's look at what other countries are doing:
  • The People's Bank of China has piloted its digital yuan across major cities and is using it in cross-border settlements. The goal? Reduce dependence on the U.S. dollar and SWIFT>
  • The European Central Bank is preparing a digital euro, citing the need to preserve monetary sovereignty.
  • India and Nigeria are rolling out digital currencies for financial inclusion and operational efficiency.
  • The UK, Brazil, Japan, and even smaller economies are moving forward in testing phases.
The U.S., once a leader in global monetary innovation, is now sitting this revolution out.


Why the Dollar Is At Risk

For decades, the U.S. dollar has been the world's reserve currency. This status gives the U.S. enormous strategic advantages:
  • Global demand for U.S. Treasuries lowers borrowing costs.
  • Dollar dominance powers sanctions and trade leverage.
  • The SWIFT network, anchored in the dollar, enables global surveillance and enforcement.
But CBDCs represent a potential breakaway architecture. For example:
  • China's digital yuan can bypass SWIFT entirely.
  • CBDCs can be used for bilateral trade without routing through U.S. banks.
  • Regional currency blocs (BRICS, ASEAN) are exploring shared digital platforms.
Without a competitive digital alternative, the dollar could gradually lose relevance, particularly in non-Western trade zones.


Domestic Consequences: A Fragmented System

The ban doesn't just impact geoeconomics and geopolitics; it affects the U.S. financial system internally.

Without a digital dollar:
  • Stablecoins like USDT and USDC fill the gap, often without full regulatory oversight.
  • Big tech companies (Meta, PayPal) are creating privately controlled digital money, raising issues of accountability.
  • Crypto volatility undermines consumer trust in digital transactions.
  • Financial inclusion efforts stall, particularly among unbanked communities that CBDCs could have reached. It is important to point out, though, that by its own estimates, the Federal Reserve has argued that this is less of an issue in the U.S. as it is in other countries.
By refusing to build a digital alternative, the U.S. is ceding monetary control to private actors and potentially to foreign governments.


The Surveillance Debate

Opponents of CBDCs argue they are a surveillance tool in disguise, and they are not wrong to be cautious:
  • China's digital yuan is linked to its social credit system.
  • A poorly designed CBDC could enable financial censorship, transaction tracking, and behavioural control.
But those risks depend on how a CBDC is built; not whether it exists. The U.S. had the opportunity to lead by example:
  • Building a privacy-preserving, offline-capable digital dollar.
  • Limiting data retention and designing for cash-like anonymity.
  • Enshrining civil liberties into digital monetary architecture.
Now, that opportunity may be slipping away.


A Missed Opportunity for U.S. Leadership

Trump's executive order wasn't just a ban; it was a retreat:
  • The U.S. is surrendering its ability to set the standards for digital currencies.
  • It risks dependency on foreign digital systems in the long term.
  • It may forfeit its ability to influence cross-border monetary policy in a digitised world.
And perhaps most troubling for the U.S: by avoiding CBDCs out of fear, the U.S. may be inadvertently inviting greater systemic risk, at home and abroad.


Final Thoughts: It's Not Too Late

CBDCs are not just about technology. They are about sovereignty, control, and relevance in the digital era. The U.S. can still re-enter the game, if the political will exists.

One final comment: U.S. President Donald Trump and his family have issued their own digital coins.


Wolf Street Economics.

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