Donald Trump’s recent executive order to ban a “digital dollar” has unexpectedly cleared the way for China and Europe to potentially set global standards with their central bank digital currency (CBDC) prototypes. As the United States opts out, remaining the only major economy with such a ban, it stands apart from over 130 countries that are exploring CBDCs as part of the global financial system’s technological evolution.
This development comes at a time when digital currencies are seen as the next step in monetary evolution, capable of enabling 24/7, real-time, cross-currency payments and serving as a modern alternative to declining physical cash use. Critics, however, argue that the benefits touted by proponents of digital currencies can be realized through existing financial systems and express concerns, echoed by Trump, that CBDCs could potentially enable governmental monitoring—claims that central bankers deny.
China, the Bahamas, and Nigeria are among the frontrunners in the CBDC space, already witnessing growing adoption of their digital currencies. Meanwhile, the European Central Bank is poised to define the key features of a digital euro later this year, despite some resistance within the European Union.
Josh Lipsky of the Atlantic Council’s Global CBDC Tracker suggests that while Trump’s ban might not significantly impact U.S. domestic policies—given the Federal Reserve’s lack of interest in a retail digital dollar—it sends a potent message internationally. According to Lipsky, the absence of U.S. participation in CBDC development gives Europe a unique opportunity to lead in setting standards for privacy and cybersecurity in the digital euro era.
Furthermore, with the U.S. sidelined, dollar-backed “stablecoins” are likely to become the unofficial digital stand-ins for the dollar for the foreseeable future. At the same time, China finds itself in a favorable position to promote its digital currency expertise to other nations, enhancing its influence in the digital currency landscape. This strategic shift underscores the significant geopolitical implications of the U.S. decision to ban a digital dollar, reshaping the global financial ecosystem’s future dynamics.
