What Does Trump's CBDC Ban Mean for Digital Payments?

February 2025

Stablecoins

Lorien Carter

Senior Research Analyst

US President Donald Trump has signed an executive order that prevents federal agencies from issuing or endorsing central bank digital currencies (CBDCs). The order, titled Strengthening American Leadership in Digital Financial Technology, was signed on 23rd January 2025, and highlights concerns about the risks CBDCs pose to financial stability and privacy.

Trump’s directive makes the position clear:

“Measures will be taken to protect Americans from the risks of CBDCs, which threaten financial system stability, individual privacy, and US sovereignty. This includes prohibiting the establishment, issuance, and use of CBDCs within the United States.”

However, the order doesn’t just block CBDCs – it also promotes the development of digital assets and blockchain technologies, with key provisions including:

• Advancing the global growth of dollar-backed stablecoins.
• Safeguarding citizens and businesses’ rights to access open blockchain networks without the threat of unlawful censorship.
• Promoting fair access to banking services for law-abiding citizens and businesses.
• Creating a President’s Working Group on Digital Asset Markets, chaired by the Special Advisor for AI and Crypto.

Our View

By endorsing private digital currencies over CBDCs, the US may trigger a new wave of innovation in digital payments. Focusing on the development of stablecoins and private digital currencies could pave the way for more efficient, borderless payment systems that benefit both businesses and consumers. For example, Tether – the issuer behind the world’s most used stablecoin – announced $13.7 billion in profits for 2025, half of which will be reinvested into new ventures, including expansions into telecoms, AI, and new financial services.

Stablecoins also offer significant advantages for businesses making cross-border payments, eliminating foreign exchange fees and enabling instant transactions regardless of location. While CBDCs are still working on similar capabilities, many countries are experimenting with linking their digital currencies for global use.

However, endorsing private currencies raises concerns about market stability. The 2022 collapse of Terra Luna – a stablecoin that lost its 1:1 peg to the dollar – showed how easily such currencies can destabilise financial markets. If similar crashes occur, they could undermine confidence in the entire digital currency market and create systemic risks.

Despite these concerns, regulatory oversight of private digital currencies could restore investor confidence and promote wider adoption. Proper regulation would help stabilise the market, much like the recent delisting of Tether’s USDT in Europe, where stricter crypto regulations are being introduced. A more favourable US regulatory approach could boost the market, ensuring stablecoin listings stay strong.

For major stablecoin issuers like Ripple and Tether, this shift could offer significant advantages. Ripple’s RLUSD stablecoin, designed for large institutional payments, could thrive in a crypto-positive regulatory environment. The backing of private digital currencies might also ease concerns from institutional players, which are crucial for scaling digital currency adoption.

How Risky is De-dollarisation for the US?

As the US dollar remains the cornerstone of global trade, the rise of CBDCs in other nations could reduce the dollar’s dominance. The US’s refusal to embrace a digital version of its currency might leave it trailing behind as other countries push forward with CBDC adoption.

China, for example, is leading the way with its digital yuan, already being tested in several major cities and international events. This progress is part of the mBridge cross-border project, which aims to create alternatives to the SWIFT system and reduce reliance on the US dollar. Countries like the UAE are already exploring digital yuan use, and the BRICS nations have discussed using CBDCs for cross-border transactions, further threatening the dollar’s grip on global finance.

Conversely, US-backed stablecoins could help maintain the dollar’s dominance. Since most stablecoins, such as USD Coin and Tether, are pegged to the US dollar, transactions using these stablecoins would likely continue to rely on dollar-backed assets. However, private stablecoins may struggle to scale as quickly as centrally-mandated CBDCs, which could impact their role in global trade.

The Struggle for Monetary Sovereignty

Central banks have long cited the rise of cryptocurrencies as a threat to their control over monetary policy, particularly given that stablecoins essentially perform the same functions as CBDCs. By advocating for cryptocurrencies over CBDCs, the US may be allowing private companies to dominate the digital currency space, potentially eroding government control over economic policy.

With an increasing volume of transactions flowing through stablecoins, the US Federal Reserve could find it more challenging to manage inflation or respond to financial crises. Preserving control over currency issuance and monetary policy remains a key motivator for central banks, as it ensures they can guide the economy and maintain financial stability.

Lorien is a Research Analyst in the Fintech and Payments team at Juniper Research, and specialises in analysing and forecasting emerging trends and innovations in financial markets. Her latest reports have covered topics including Virtual Cards, Network Tokenisation, and CBDCs & Stablecoins.