During a campaign stop in New Hampshire, former President Donald Trump made a promise to never allow the creation of a U.S. Central Bank Digital Currency (CBDC), calling it a “dangerous threat to freedom.” This aligns with the arguments that Republicans have been using in various states and in Congress. In contrast, Democrats, including President Joe Biden, have been more open to the possibility of the Federal Reserve creating a digital version of the dollar.
In his speech, Trump also promised to protect Americans from government tyranny. He stated, “As your president, I will never allow the creation of a Central Bank Digital Currency.” It has been reported that Trump has profited from NFT sales, adding to his opposition towards CBDCs.
CBDCs are digital versions of fiat money, in this case, the dollar, that are exchanged through blockchains. Proponents argue that a digital dollar could be exchanged securely and with less volatility than seen in the crypto market. However, Trump and other Republicans believe that a CBDC would give the federal government too much control over individuals’ money.
Despite Democrats discussing the benefits of creating a digital dollar, there has been little movement towards actually implementing one. In September 2022, Biden released a framework that asked the Federal Reserve to explore the creation of a CBDC, but there has been no significant progress since then. Additionally, during a House Financial Services Committee hearing in March 2023, Fed Chair Jerome Powell stated that a U.S. digital currency was still in its early stages of experimentation.
While CBDCs are one option for a fiat-backed digital currency, another option is stablecoins. These can be created by private entities, such as USDC, which was launched by Coinbase in collaboration with Circle. Unlike CBDCs, stablecoins require traditional banking system reserves.
Biden acknowledged the potential benefits of a U.S. CBDC in his March 2022 order, stating that it could support efficient and low-cost transactions, especially for cross-border funds transfers and payments. However, there are still many factors to consider and hurdles to overcome before a CBDC becomes a reality in the United States.
