During a campaign speech in New Hampshire, former U.S. president Donald Trump stated that he would not allow the issuance of CBDC if he gets elected this November. According to him, central bank digital currency represents a dangerous threat to Americans’ freedom.
“Tonight, I am also making another promise to protect Americans from government tyranny. As your president, I will never allow the creation of a Central Bank Digital Currency. Such a currency would give the federal government, our federal government, absolute control over your money. They could take your money, and you wouldn’t even know it was gone,” - he said.
While the Federal Reserve has made no decisions on whether to implement a CBDC or not, the agency has been exploring the potential benefits and risks of the technology for at least two years. In January 2022, the Fed released a discussion paper that examines the pros and cons of CBDC, looking forward to engaging with the public and getting relevant feedback, which turned out to be mainly positive, while some individuals suggested that it would have a net negative effect and that the U.S. should rather return to gold standard or bitcoin in order to achieve stability. According to the Fed, CBDC, if implemented, “would be the safest digital asset available to the general public, with no associated credit or liquidity risk.” The latest comments on the future of the U.S. CBDC from the Fed, however, were less than encouraging:
“I have yet to see a compelling argument that a U.S. CBDC could solve any of these problems more effectively or efficiently than alternatives, or with fewer downside risks for consumers and for the economy… The potential benefits of a U.S. CBDC remain unclear, and the introduction of a U.S. CBDC could pose significant risks and tradeoffs for the financial system.” - Fed Governor Michelle W. Bowman last October
Trump’s rival, incumbent president Joe Biden, hasn’t proved to be a crypto-friendly politician either. Under his presidency, the regulators, especially the SEC, have shown increased crypto-related enforcement actions, while no proper legal framework was introduced and no major blockchain initiatives were approved. During his first term, Trump, who once said that cryptocurrencies are “based on thin air”, and his administration were not huge fans of the industry. While some reports suggest that a second Trump administration would generally be more liberal towards the industry, others believe that a friendlier regulatory approach could actually do more harm, as ease on crypto can eventually empower bad actors.
It is currently unclear how the results of the presidential elections will impact the situation in the crypto market. However, if major world economies, including the EU and China, continue working on a legal framework for the industry and developing CBDCs, the U.S. will have to follow the trend eventually to avoid the outflow of investments and startups, whoever is in charge.