US President Donald Trump Thursday (Jan 23) issued an executive order banning establishment of a ‘digital dollar’. Trump argued his move would protect the Americans from the risks associated with the central bank digital currencies (CBDCs) that “threaten the stability of the financial system, individual privacy, and the sovereignty of the United States.”
The CBDCs could be used by America’s central bank interchangeably with physical currency, giving the bank full authority over the supply of the virtual currency. The idea to ban the digital dollar has long been supported by Congressional Republicans.
Joe Biden had approved CBDCs
The previous administration of Joe Biden had green-lighted the creation of CBDCs with aim to bring people without bank accounts into the US financial system. But Republicans vehemently oppose the idea.
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They argue that these digital currencies could be used by the government to encroach upon people’s privacy, which could undermine the public trust. While the American central bank, which is said to have conducted its preliminary research on launching CBDCs has claimed it doesn’t have any plan to put a digital dollar into circulation.
Fed chair Jerome Powell told the US Senate Banking Committee last year that "People don't need to worry about a central bank digital currency”.
Promoting cryptocurrencies
The US president also signed another executive order to promote the use of cryptocurrencies in the US and to build a national digital asset stockpile.
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“The digital asset industry plays a crucial role in innovation and economic development in the United States, as well as our Nation’s international leadership,” the order states.
Trump was a vocal critic of cryptocurrencies during his first term but changed his stance following massive contributions from the industry during the past four years. Some crypto firms are believed to have spent tens of millions of dollars to help Trump win a second term in office.
(With inputs from agencies)