With Donald Trump winning in the Iowa caucus on Monday and taking over New Hampshire, the next primary battleground, “45” made a strong statement about digital currency: He’s against it. At least the one issued by the government, in the form of central bank digital currency (CBDC):
“Tonight I will also make another promise to protect Americans from government tyranny. As your president, I will never allow the creation of a digital currency by the central bank,” he said Wednesday night.
“A digital currency would give our federal government absolute control over your money. They could take your money and you wouldn’t even know it was gone. It would be a dangerous threat to freedom and I would stop it,” Trump added.
Trump joins many other prominent Republicans in speaking out against a CBDC. Florida governor Ron DeSantis, second to Trump in Iowa, was the first major candidate to speak in opposition. Vivek Ramaswamy, a Bitcoin advocate, said this “hell no” to one. Tom Emmer, the leader of the House, has presented a bill to Congress to ban a US CBDC. Senator Ted Cruz of Texas did it something similar in the upper chamber. The North Carolina House of Representatives has passed a bill to ban the so-called “digital dollar.”
Trump’s opposition to a CBDC may be motivated by Ramaswamy’s support for his candidacy after the latter’s poor showing in Iowa. But Trump’s opposition to a CBDC is a bit curious given everything that’s happening right now in the United States and around the world. The Federal Reserve currently has no concrete plans for a CBDC. The most any U.S. official has said in support is that the United States should investigate and test the idea. Trump is rejecting a government policy that is not currently government policy and does not appear likely to become one in the immediate future.
Indeed, he hinted at this strange reality in the speech, acknowledging that many in the audience may not know much about CBDCs, one of the most arcane and slow-moving areas of innovation in the digital currency landscape.
Read all: Emily Parker – Central bank digital currencies are unexpectedly becoming a presidential election issue
“I didn’t know you knew so much,” Trump said as the crowd cheered. “New Hampshire: Very smart people. Very current. You know what they’re doing. “They” are the federal government.
It is true that CBDCs are a popular proposition in many other countries. China, the Bahamas, Jamaica and Nigeria have already introduced working CBDCs.
Central bankers in Brazil, China, the euro area, India and the United Kingdom are further along in the research and development stages of launching CBDCs. According to data, more than 100 countries are in the exploration stage the International Monetary Fund.
So why is Trump talking about an issue that doesn’t seem to matter much to voters, an issue that isn’t particularly “alive” as a substantive possibility in the real world?
My colleague, Emily Parker, looked at the debate from May last year and predicted it would become a talking point during the election campaign. “Expect the CBDC issue to become a presidential campaign talking point,” Ron Hammond, director of government relations at the Blockchain Association, told Parker. “Perfect intersection between fear of government, China and financial collapse with the banking crisis.”
In other words, a CBDC, which would see the Federal Reserve issue a digital version of the greenbacks in your wallet, is a no-brainer. Talking about it allows candidates to show their opposition to government interference, implicitly aligning themselves with the cause of personal freedom. Cash, while less useful from a monetary perspective, is a tangible form of self-sovereignty. A dollar in your pocket is the “bearer asset” par excellence; it can only be taken away by persuasion or force.
It’s an open question whether a US CBDC would truly give the government control over your money. It would depend on how the dollar was issued and who will have access to the wallets where it was stored. Digital dollar advocates, including former Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo, who leads the pro-CBDC Digital Dollar project, argue that it could protect privacy while promoting financial inclusion and the promotion of dollar (and US power) around the world. It seems likely that, if a CBDC were enacted here, it would be “brokered” by the private sector, particularly stablecoin issuers, such as Circle, the company behind USDC, which has a market capitalization of around $25 billion and much adoption in tour. the world.
But it also seems likely that the Federal Reserve will protect its role as a censor of some undesirable transactions, including money laundering and terrorist financing. That power would open the door to officials arbitrarily blocking transactions they don’t approve of, giving us a “Operation Choke Point” on steroids. But, again, this is largely conjecture. There is currently no concrete CBDC policy to discuss.
However, Trump’s outright opposition to a CBDC could have real consequences. It will likely make it harder to introduce and make life easier for Circle and other stablecoin issuers (Circle is against a government-controlled CBDC, for obvious reasons).
What this means for permissionless cryptocurrencies, such as bitcoin (BTC), is another open question. Politico argued recently that Trump 2.0 would be good for cryptocurrencies, freeing the shackles imposed on the sector following the epic scandals of 2022 (“Donald Trump could be the unexpected savior of cryptocurrencies”). But, again, this is all conjecture. Trump was said to be a better candidate for cryptocurrencies in 2016 and was fiercely opposed to financial freedom when he took office.
As with most things Trump says: take this with a grain of salt. But, given the current strong opposition to CBDCs in Republican circles, don’t bet on a digital dollar anytime soon. There are few votes available to rule in favor of one of them, but there could be a lot of political hay to be made against one of them.
