With the U.S. Out, Who Will Set the Global Standards for Digital Currencies?

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Mfame Editor
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  • The executive order halts U.S. central bank digital currency (CBDC) plans, leaving other nations to take the lead.
  • China’s rapid expansion and Europe’s upcoming digital euro initiative gain momentum.
  • With a ban on a government-backed digital dollar, dollar-pegged stablecoins may take its place in financial markets.

In January 2025, former U.S. President Donald Trump issued an executive order banning the development of a digital dollar, effectively removing the United States from the global CBDC race. With China and Europe advancing their central bank digital currency (CBDC) initiatives, experts suggest the U.S. absence could shift the balance of power in global digital finance, reports Reuters.

What Trump’s Digital Dollar Ban Means for Global Finance:

Trump’s executive order prohibits any U.S. agency from launching, promoting, or issuing a CBDC. The move marks a significant policy shift, signaling that:

  1. China and Europe can shape global CBDC standards without U.S. competition.
  2. Stablecoins (privately issued digital assets pegged to the dollar) may become the de facto digital dollar.
  3. The U.S. risks falling behind in financial technology innovation.

According to Josh Lipsky of the Atlantic Council, the ban may not significantly impact domestic policy, as the Federal Reserve had not pursued a retail digital dollar aggressively. However, the decision has geopolitical implications, allowing Europe and China to lead digital finance innovations.

China & Europe Gain Ground in the Digital Currency Race:

While the U.S. withdraws from CBDC development, other nations continue to push forward:

  1. China’s Digital Yuan – Already seeing increased adoption, with potential for cross-border expansion.
  2. European Central Bank’s (ECB) Digital Euro – Set to outline key features later this year despite some political resistance.
  3. Other CBDC Leaders – Countries like Brazil, Nigeria, and the Bahamas continue developing their national digital currencies.

China is expected to leverage the U.S. absence to promote its Digital Yuan globally, particularly among developing economies. Meanwhile, European policymakers could set global privacy and security standards for CBDCs through the Digital Euro initiative.

Implications for the Global Financial System:

Trump’s ban also aligns with a broader geopolitical divide over digital currencies. Recently, the Bank for International Settlements (BIS) withdrew from its joint “mBridge” project with China and Hong Kong, signaling potential tensions in the CBDC space.

Meanwhile, the Agora project, which includes Western central banks like the Federal Reserve, Bank of England, and European Central Bank, is being closely watched. Some analysts suggest that U.S. participation in digital currency initiatives could shift toward stablecoins instead of government-backed CBDCs.

According to Lewis McLellan of OMFIF, the decision could impact global “de-dollarization” trends, as some countries look for alternatives to the U.S. dollar in international trade. However, given the dollar’s dominance in financial markets, stablecoins could bridge the gap left by a government-backed CBDC.

Call for Adaptation in Digital Finance:

While the U.S. has backed away from a digital dollar, analysts believe the financial sector must adapt:

  1. Stablecoins will likely play a bigger role in digital transactions as private entities step in.
  2. U.S. financial institutions may need to align with international CBDC frameworks to remain competitive.
  3. Digital currency interoperability remains a challenge, with questions over how CBDCs from different regions will interact.

The global financial system is evolving rapidly and with the U.S. stepping back from CBDC development, China and Europe could shape the future of digital finance.

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Source: Reuters