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 the institutional adoption of cryptocurrencies, according to industry executives.
The decree, signed on January 23, prohibits the creation, issuance, circulation or use of CBDCs, citing concerns about their potential to threaten the stability of the financial system, individual privacy and national sovereignty.
The executive order’s ban on CBDCs is a “game changer” for the U.S. crypto industry, according to Anndy Lian, author and intergovernmental blockchain advisor.
Likewise, the new crypto task force signals a clearer and “more structured” crypto regulatory landscape, Lian told Cointelegraph.
“It’s not just about making rules; it’s about setting the stage for crypto to play a bigger, more legitimate role in the economy,” he said. “This clarity could attract large investors who have been sitting on the sidelines, waiting for something like this to happen, to act.”
The executive order could also catalyze the adoption of crypto payments among large U.S. financial institutions, according to economist Alex Krüger, who said institutions would begin using blockchain for payments and tokenization.
Source: Alex Kruger
While CBDCs have been praised for their potential to increase financial inclusion, critics have expressed concerns about their surveillance capabilities and the risk of excessive government intervention.
In July 2023, Brazil’s central bank released the source code for its CBDC pilot project, and it only took four days for people to notice the monitoring and control mechanisms built into its code, allowing the bank central to freeze or reduce user funds in CBDC wallets.
As of May 2024, around 140 countries were working on CBDC pilot projects, with China’s digital yuan being one of the most advanced, Cointelegraph reported.
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The executive order’s ban on CBDCs is a “curve bender” for crypto and the broader financial sector that signals a “gamble” 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. This is a vote of confidence in Bitcoin, Ethereum and others, potentially giving them a boost in legitimacy and market value.
Related: China sold nearly $20 billion worth of Bitcoin following PlusToken seizure: CryptoQuant CEO
Another notable development is that the executive order will exclude the US Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) from cryptocurrency working groups.
According to Caitlin Long, founder and CEO of Custodia Bank, this could put an end to previous efforts to debank the crypto industry. Long wrote in a January 23 article:
“Trump’s #crypto executive order EXCLUDES the Fed and FDIC from the Digital Assets Task Force. Both tried to kill the industry through #debanking and specifically targeted my company (Custodia Bank). Both belong outside. Nature heals.
Source: Caitlin Long
Under the Biden administration, several cryptocurrency companies have been denied access to banking services in what some insiders have described as an orchestrated effort dubbed “Operation Chokepoint 2.0.”
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