In 2025, the U.S. took a dramatic turn away from central bank digital currencies (CBDCs). While the People’s Bank of China advances its digital yuan, American supporters of a digital dollar are alarmed by the Federal Reserve’s apparent surrender of leadership in this space. This shift, driven by President Trump’s policies, marks a pivotal moment in global finance.
The Rise and Fall of the Digital Dollar
Central bank digital currencies have dominated financial headlines for years. According to the Bank for International Settlements (BIS), nearly 130 central banks worldwide were exploring CBDCs by late 2024, including giants like the Federal Reserve, the European Central Bank, and the People’s Bank of China. Small nations like the Bahamas and Nigeria have already fully implemented CBDCs, while China’s digital yuan pilot, launched in 2020, now boasts 260 million users.
The U.S., however, lagged behind. The Federal Reserve moved cautiously, studying others’ experiences to minimize risks. But domestic opposition grew, viewing a digital dollar as a threat to privacy due to its “transparent” transaction tracking. In May 2024, the U.S. House passed a bill banning the digital dollar, though it stalled in the Senate. Then, on January 23, 2025, President Trump signed an executive order, “Strengthening American Leadership in Digital Financial Technology,” prohibiting the Federal Reserve from issuing a CBDC.
Trump’s Crypto Alternative
Trump’s order didn’t just halt the digital dollar—it pivoted to cryptocurrencies. On March 7, he established the Bitcoin Strategic Reserve, using 200,000 confiscated bitcoins. A proposed Bitcoin Act, now under congressional review, aims to buy 1 million bitcoins—worth roughly $100 billion—over five years. Trump also champions stablecoins like Tether (USDT) and USD Coin (USDC), which dominate 90% of the $212 billion stablecoin market, per Bloomberg.
Federal Reserve’s Response
Many expected Fed Chairman Jerome Powell to resist Trump’s ban. Instead, on February 12, 2025, Powell told Congress, “During my term, the Fed will never issue a CBDC.” With his tenure ending in May 2026, time is short for any reversal. Powell pointed to FedNow, a real-time payment system launched in 2023, as a sufficient alternative, downplaying the need for a digital dollar. Some speculate he’s aligning with Trump and the crypto industry, especially after bitcoin prices rose 3% following his remarks.
China’s Digital Yuan Gains Ground
Is the U.S. ceding global financial dominance? Critics worry that China’s digital yuan, paired with its mBridge payment platform, could challenge the U.S. dollar’s supremacy. The BIS, once a key mBridge supporter, withdrew in October 2024—possibly to curb China’s rise. Meanwhile, the BIS’s Agora project, involving Western central banks like the Federal Reserve Bank of New York, faces uncertainty post-Trump’s ban. A compromise? Allowing U.S. banks to use dollar-tied stablecoins in Agora, blurring the line between private and central digital currencies.
Author: Planet Today
