US President Donald Trump’s executive order banning the creation of central bank digital currencies (CBDCs) in the United States could mark a significant shift in institutional cryptocurrency adoption, according to industry executives.
The executive order, signed Jan. 23, prohibits the establishment, issuance, circulation or use of CBDCs, citing concerns over their potential to threaten financial system stability, individual privacy and national sovereignty.
The executive order’s CBDC ban is a “game-changer” for the crypto industry in the US, according to Anndy Lian, an author and intergovernmental blockchain adviser.
Likewise, the new crypto task force signals a clearer, “more structured” crypto regulatory landscape, Lian told Cointelegraph.
“This isn’t just about setting rules; it’s about setting the stage for crypto to play a bigger, more legitimate role in the economy,” he said. “This clarity could lure in the big investors who’ve been sitting on the sidelines, waiting for something like this to make their move.”
The executive order could also catalyze crypto payment adoption among large financial institutions in the US, according to economist Alex Krüger, who said institutions will start using blockchain for payments and tokenization.
Source: Alex Krüger
While CBDCs have been lauded for their potential to increase financial inclusion, critics have raised concerns about their surveillance capabilities and potential for government overreach.
In July 2023, Brazil’s central bank published the source code for its CBDC pilot, and it took just four days for people to notice the surveillance and control mechanisms embedded within its code, allowing the central bank to freeze or reduce user funds within CBDC wallets.
As of May 2024, around 140 countries were working on CBDC pilots, with China’s digital yuan being one of the most advanced, Cointelegraph reported.
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Trump’s CBDC ban is a bet on the existing crypto market
The executive order’s ban on CBDCs is a “curveball” for crypto and the wider financial industry that signals a “bet” on the crypto industry, Lian told Cointelegraph:
“This move tells you where Trump stands: He’s betting on the existing crypto market rather than creating government-backed digital dollars. It’s a vote of confidence in Bitcoin, Ethereum and others, potentially giving them a boost in legitimacy and market value.”
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In another noteworthy development, the executive order will exclude the US Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) from cryptocurrency working groups.
This may put an end to previous crypto industry debanking efforts, according to Caitlin Long, founder and CEO of Custodia Bank. Long wrote in a Jan. 23 X post:
“Trump’s #crypto executive order EXCLUDES the Fed & FDIC from the digital asset working group. Both tried to kill the industry thru #debanking & especially targeted my company, [Custodia Bank]. Both belong on the outside. Nature is healing.”
Source: Caitlin Long
During the Biden administration, multiple cryptocurrency firms were denied access to banking services in what some insiders described as an orchestrated effort dubbed “Operation Chokepoint 2.0.”
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