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An executive order issued by President Donald Trump Thursday bans government agencies from issuing, establishing, or promoting central bank digital currencies (CBDCs) unless required by law, defining such currencies as “a form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank.”
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The move fulfills a campaign promise by Trump, who pledged that if elected he would bar agencies such as the Federal Reserve from creating a digital currency in favor of support for “decentralized” digital currencies such as Bitcoin, according to a 2024 report by Politico.
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The order also establishes a presidential working group aimed at creating “regulatory clarity” for the digital asset space, to be led by “White House AI & Crypto Czar” and PayPal alum David Sacks. Among other actions, the group will explore the potential creation of a national stockpile of digital assets.
Dive Insight:
The move is the latest attempt by Trump to woo the cryptocurrency industry in the early days of his presidency, following his nomination of crypto-friendly leadership in agencies such as the Securities and Exchange Commission. Trump also declared his intention to make the U.S. the “world capital of artificial intelligence and crypto” in a televised speech to the World Economic Forum on Thursday.
According to a breakdown by Gibson Dunn, Trump’s executive order on Thursday revokes a 2022 directive from the Biden administration to investigate the role of digital assets, including CBDCs, in the financial system.
In an email to CFO Dive, Michael Levine, CFO of blockchain and cryptocurrency security platform Fireblocks, said, “President Trump’s executive order represents a pivotal moment in the evolution of digital financial technology, rejecting CBDCs and instead advocating for decentralized digital assets and private sector innovation.” “The administration is demonstrating its commitment to economic liberty and building trust in blockchain-based solutions by putting privacy first and opposing what some perceive to be the ‘ moneysurveillance’ risks associated with CBDCs.”
Miles Fuller, senior director, of public sector operations for digital asset tax and accounting service provider Taxbit, told CFO Dive that the executive order’s prohibition on issuing CBDCs is likely “the most pointed statement” included in it. This makes it abundantly evident that the United States will not produce a central bank-backed digital currency.
Whether they have used or avoided digital assets, the directive also makes it obvious to CFOs and other corporate executives that they need to pay close attention to the crypto space, he added.
In an interview with company executives, Fuller remarked, “Maybe I can stop avoiding crypto because the uncertainty is going to go away.” Or perhaps some rules will be released that alter the criteria for compliance if we are already using crypto. Therefore, we must be mindful of those. In what ways will things change?
The establishment of a specialized working group to address some of the more ambiguous aspects of cryptocurrencies is one of the order’s benefits.
According to Fuller, “iIt’sexciting to see the appointment of a very dedicated working group to resolve some of what have been friction points in the crypto space for the past number of years.”
These sources of contention include the continuous debate over various definitions of digital assets, such as what constitutes money, commodity, or security, as well as the accounting and tax rules governing them. A Biden-era rule that required companies holding such assets to declare them as liabilities was also overturned by the SEC on Thursday. Industry supporters criticized the rule, claiming it deterred companies from storing cryptocurrencies.
According to Fuller, defining so-called “stablecoins” is one of the first tasks the working group might take on in that regard.
According to a 2023 World Economic Forum research, a “stablecoin” is an asset whose value is linked to another asset, but which is usually issued by private organizations instead of central banks. That description, however, is ambiguous and not a legal requirement; for instance, Fuller stated that certain stablecoins maintain their value algorithmically and are not redeemable, but others may be exchanged for other currencies, like the US dollar.
According to Fuller, this is the point at which the government should step in and ask, “What is the actual definition of a stablecoin?”
Although government officials like Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) have filed legislation on the topic and the Treasury Department has provided some guidance for such assets, the United States does not yet have a legal framework for such assets.
According to the executive order, the presidential working group’s objective includes proposing a Federal regulatory framework that would control the issue and operation of digital assets, including stablecoins, in the United States. “Market structure, oversight, consumer protection, and risk management provisions will be examined in the Working Group’s report.”