Seeking re-election for president, Donald Trump has made his views on central bank digital currencies (CBDCs) very clear: he will not allow their creation. With other countries piloting centralized digital currencies, we wanted to find out how impactful it would be on the US as an innovation hub to halt the development of a digital dollar if Trump is re-elected to the White House.
Although not currently a major point of debate in the run-up to the US presidential election, Trump first made his views on a CBDC clear at a rally in Portsmouth, New Hampshire on January 18, 2024 during the Republican presidential primary campaign. Declaring it a “dangerous threat to liberty,” he said he would “protect America from government tyranny” by never allowing its creation.
JUST IN: 🇺🇸 Donald Trump says “As your president, I will never allow the creation of a Central Bank Digital Currency. Such a currency would give our federal government absolute control over your money.” pic.twitter.com/lSE2AGYgOm
— Bitcoin Magazine (@BitcoinMagazine) January 18, 2024
Trump reinforced his views at a rally in Laconia, New Hampshire on January 22, 2024. He gave credit to Vivek Ramaswamy, a candidate who has suspended his campaign but has been a vocal critic of CBDCs, saying, “I will never support the creation of a central bank digital currency.”
Is this a popular move?
Florida Governor Ron DeSantis also campaigned against the former president, but before the New Hampshire primary he suspended his campaign and endorsed Trump, saying: “I signed a pledge to support the Republican nominee and I will honor that promise.”
On January 24, 2024, the results of the primary election came back with Trump winning 54.2 percent of the vote share against his eventual rival Nikki Haley.
Whether you generally agree with Trump’s policies or not, his views on CBDCs have pricked the ears of those in the fintech sphere. We polled our readers and heard from industry experts whether they agreed or disagreed with his comments. More than half (64 percent) agreed with the former president.
Impact on the US as a crypto hub
CBDCs can be considered a gateway for a country to accept cryptocurrency, as it is a way for a government to understand and grasp the potential of blockchain and tokenization.
As a result, halting the development of a digital dollar could also have a major impact on the prospects of crypto in the country. Nick Maynard, VP of fintech market research at Juniper Research, the market research firm, said: “It [ban of CBDCs] will limit the usefulness of the US as a global crypto hub, and will indicate the potential for further regulatory interventions to stifle innovation, which could cause investors and startups to choose other destinations for their activities.
“This would signal the potential for further regulatory intervention in other crypto endeavors, likely causing vendors to seek more stable regulatory prospects in other markets.”
Keeping up with other countries
Nils Behling, CEO of Tradeteq, the private debt investment marketplace, offered some similar views: “By the end of 2023, more than 130 central banks, representing 98 percent of global GDP, have initiated programs to explore CBDCs or If the US were to stop the development of its CBDC, it could potentially lose its competitive advantage in the global crypto market.
Research from the International Monetary Fund (IMF) found that three countries (the Bahamas, Jamaica and Nigeria) have already introduced CBDCs. In addition, more than 100 other countries, including powerhouses such as Brazil, China, India and the United Kingdom, are following suit.
On the other hand, however, Behlind also added: “That said, one could also argue that the opposite could be true: Any CBDC endorsed by the US government would almost certainly be in competition with existing digital currencies. These stablecoins , issued by private entities but pegged to the USD, will almost certainly become less relevant if the US government endorses its own version of a stablecoin. This in turn could have potential ripple effects in the broader crypto ecosystem.”
Stay strong and ahead
Cuautemoc Weber, CEO and co-founder of Gateway.fm, the decentralized blockchain infrastructure node provider, pointed out the strengths of the US financial system: “Traditional financial systems continue to dominate in the US, so stopping crypto development will not causing a blackout in the financial sphere. However, it will dramatically hamper America’s competitiveness in the emerging Web3 arena.
“Moving forward, it is crucial for the US to strike a balance between innovation and regulation to harness the full potential of the crypto sector without compromising security and stability. This is best achieved by consultation with industry stakeholders committed to helping the space grow with the principles of transparency and security at its core.”
Concerns can be dealt with
Analyzing Trump’s comments about a “threat to freedom”, Finimize’s global markets analyst Reda Farran looks at how privacy and freedom issues surrounding the development of a CDBC can be effectively addressed. He said the two main ways to deal with concerns involved ensuring prioritization on privacy and that the digital dollar should complement physical banknotes, rather than replace them entirely.
He added: “Like any emerging technology, it is essential to carefully consider the pros and cons. Could CBDCs pose risks to privacy and freedom? Absolutely. But if these concerns are addressed effectively, they have the potential to be used as a beneficial force.
“After all, CBDCs have many advantages: they cannot be counterfeited, they make it easier for governments to spot criminal activity, and since they have the same value as their paper counterparts, they will be much less volatile than cryptocurrencies. They also allow for instant and cheap money transfers (including cross-border payments) that can boost economic activity, as well as give unbanked adults access to money transfer services.
“Ultimately, governments will be able to use CBDCs to quickly implement economy-boosting measures. For example, if they needed to transfer money to the population as many of them did during the pandemic, it would be much faster and easier if it were directly in people’s digital wallets could be deposited. This bodes well for Trump, who has never been known for fiscal austerity.”
A positive regulatory environment
Tayler McCracken, editor-in-chief at Coin Bureau, the crypto gateway platform, agreed with Trump’s views. He noted that a move away from CBDCs would not affect the US as a global crypto hub.
“If the US stops CBDC development, it is unlikely to affect its role as a global crypto hub. The real problem is the current regulatory environment, which is more inhibiting to crypto innovation than the development of CBDCs. The US can maintain its financial leadership by promoting a positive regulatory framework for cryptocurrencies, independent of CBDCs.
“In summary, the US can continue to thrive in the digital economy by supporting innovative crypto businesses and maintaining financial freedom, without necessarily endorsing CBDCs. This approach aligns with the core principles of decentralized cryptocurrencies.”
A rushed implementation could be catastrophic
As was clear from the poll, many in the industry did not feel that Trump was off base in his comments. One respondent, Michael Jackson, former chief operating officer for Skype and advisor at Concordium, a layer-1 blockchain, said: “Mr Trump’s concerns about online privacy and security, particularly around the potential implementation of central bank digital currencies are valid .
“CBDCs can offer benefits, but a simple and hasty implementation carries major risks, not least the very real chance of increased data exposure and government surveillance.
“Achieving a delicate balance between privacy, security and government oversight requires careful consideration and skillful work in a mature environment. Today we see the opposite. A party-driven tendency to throw away academia and encourage the big state.”
Francis Bignell
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