US CBDC ‘is dead’ under Trump, but stablecoins could be set to explode

US CBDC ‘is dead’ under Trump, but stablecoins could be set to explode

Trump Administration Shifts Focus From CBDCs to Stablecoins

With Donald Trump now sworn in as the President of the United States, the prospects for a central bank digital currency (CBDC) in the country appear effectively extinguished. Throughout his campaign, Trump voiced staunch opposition to CBDCs, promising in New Hampshire in 2024 to “never allow the creation of a central bank digital currency,” which he argued would grant the government “absolute control over your money.”

The President’s stance has remained unchanged since making that declaration early in his campaign. His cabinet appointments and the Republican-led Congress reflect similar opposition, aligning with his broader skepticism of government intervention in financial markets.

However, the absence of a CBDC doesn’t mark an end to U.S. involvement in digital currency innovation. Instead, stablecoins are gaining traction as a viable alternative, enjoying bipartisan support and potential regulatory clarity under the new administration.

Industry analysts suggest that the U.S. is now moving toward private stablecoins rather than pursuing a CBDC. Geoff Kendrick, global head of digital assets research at Standard Chartered, emphasized that “CBDC in the U.S. is dead under Trump,” adding that the country’s pivot to private stablecoins leaves the Federal Reserve without direct control over these digital currencies.

Legislation to regulate stablecoins is already making headway. Representative Patrick McHenry’s Clarity for Payment Stablecoins Act of 2023 is progressing in the House, while Senators Cynthia Lummis and Kirsten Gillibrand introduced a corresponding bill in the Senate. These initiatives aim to provide much-needed regulatory guardrails to encourage stablecoin adoption and offer legal certainty for industry players. Stablecoin regulation is seen as a potential “quick win” for lawmakers, particularly as they prepare for midterm elections in 2026.

Experts predict significant growth in stablecoin adoption under this administration. Kendrick speculated that stablecoin legislation could pass in the coming months, paving the way for traditional financial institutions to issue stablecoins and providing greater confidence in market leaders like Tether and USDC.

Privacy concerns remain a primary reason for the rejection of a CBDC. Critics argue that CBDCs could allow excessive government surveillance and control over financial transactions. Trump’s campaign rhetoric frequently focused on limiting government overreach, reinforcing Republican resistance to CBDCs.

John Kiff, a digital currency expert and former IMF advisor, noted that central banks have struggled to convince the public of the benefits of CBDCs. “Users want cash-like anonymity and privacy, but central banks are reluctant to offer that,” Kiff explained, citing the legal constraints of anti-money laundering and counter-terrorism financing regulations. This hesitation has stalled global CBDC adoption, with only four of the 169 projects currently underway having launched.

While the U.S. shifts its focus, other nations are forging ahead with CBDC development. China’s digital yuan has seen limited implementation, and the European Central Bank is cautiously advancing plans for a digital euro. However, Trump’s opposition may influence global momentum, potentially leading smaller economies to abandon their CBDC projects.

Some industry leaders warn that the U.S. risks falling behind in the global digital currency race. Yet, Kiff contended that retail CBDCs are not essential for maintaining international competitiveness. Instead, he underscored the importance of wholesale CBDC initiatives aimed at reducing cross-border payment costs and frictions, advocating for the Federal Reserve to explore all available options.

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