The subject of Central Bank Digital Currencies (CBDCs) has garnered significant attention in the global media over the past few years. An increasing number of central banks worldwide have been investigating the feasibility of introducing CBDCs and creating their own digital currencies. The Bank for International Settlements (BIS) in Basel has been closely monitoring this subject, ostensibly with the intention of leading the global promotion of CBDCs. By the end of the previous year, approximately 130 central banks were engaged in CBDC-related activities to varying degrees, including all major central banks, including the U.S. Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England, the Bank of Japan, the People’s Bank of China, and others, according to BIS data.
The rate at which central banks progressed toward the complete legalization of CBDCs was highly variable. The monetary authorities of certain smaller nations and offshore jurisdictions were the first to respond, with some experts speculating that these jurisdictions served as “testing grounds.” The Bahamas, Jamaica, and Nigeria have all thoroughly implemented central bank digital currencies.
China’s central bank is a leader among global economies. The People’s Bank of China (PBOC) initiated a pilot initiative in 2020 to evaluate the digital yuan. Currently, the pilot phase of CBDC testing is underway in 12 G20 countries, including China, Brazil, Japan, India, Australia, Russia, and Turkey.
The announcement of a pilot project by the ECB indicates a moderate level of development, although its scope is minor. The U.S. Federal Reserve has made even slower progress. Nevertheless, the Federal Reserve has consistently assured the public that it is making progress toward the objective of a digital currency, but it is doing so with caution, using the lessons learned from the experiences of other central banks to reduce risks.
The Federal Reserve could have advanced more rapidly toward this objective; however, a robust opposition movement against the digital dollar has emerged in the United States, which regards it as an infringement on the liberties of American citizens. The central bank’s capacity to block or “program” transactions based on user behavior and the complete “transparency” of all transactions using the currency are two of the key characteristics of any CBDC. The U.S. House of Representatives passed a bill in May 2024 that prohibited the Federal Reserve from issuing a digital dollar. However, the Senate obstructed the measure. Donald Trump was among the candidates who actively opposed the digital currency in the U.S. presidential election last year.
Trump promptly fulfilled his campaign promise regarding the digital dollar upon his return to the White House for an additional four years. On January 23, he signed an executive order entitled “Strengthening American Leadership in Digital Financial Technologies.” It also prohibited the Federal Reserve from developing and issuing a digital dollar and established a presidential working group on cryptocurrencies, among other provisions. It is worth noting that the Federal Reserve has never been explicitly addressed in previous presidential executive orders, as it is an institution that is not under government control. Nevertheless, Trump, who regards himself as a “revolutionary,” has disregarded numerous previous conventions. This executive order can be interpreted as his initial, circumspect endeavor to regulate the “independent” U.S. central bank.
The United States thus became the first country among 130 exploring CBDCs to ban them at the presidential level. Every central bank and head of state worldwide took notice of Trump’s executive order. Although the majority of central bankers and world leaders chose to disregard this decision publicly, they began to contemplate how to respond.
Trump has advocated for private digital currencies and cryptocurrencies as alternatives to the digital dollar. The United States has already implemented several specific measures to increase the use of cryptocurrencies. For instance, it was on March 7 that President Trump signed an order that established the Strategic Bitcoin Reserve. The government confiscated approximately 200,000 BTC of bitcoins at different periods for various reasons, which will comprise this reserve. Trump also intends for the reserve to expand by means of government purchases of Bitcoin on the open market. Nevertheless, an executive order is insufficient for this plan; a law is necessary to authorize the use of budget funds for BTC purchases. Congress is presently deliberating the “Bitcoin Act,” a bill that suggests the acquisition of one million BTC over a five-year period. The amount is equivalent to approximately $100 billion at the current Bitcoin price. Trump’s staff anticipates that the bill will be enacted by the end of the summer.
Nevertheless, Trump and his administration are not exclusively concentrating on bitcoin; they are also examining private digital currencies known as stablecoins. Stablecoins are digital currencies linked to gold, other commodities, or official fiat currencies. True stablecoins are those that not only have a price peg but also 100% backing in gold or fiat reserves.
The first stablecoins were introduced in the mid-2010s. Several hundred stablecoins are currently in circulation worldwide, with a total market capitalization of $212 billion at the end of last year, according to various estimates. This amount represents approximately 7–8% of the total cryptocurrency market capitalization. Stablecoins are gradually acquiring traction in the digital currency landscape, both in absolute and relative terms. The most intriguing aspect is that stablecoins pegged to the U.S. dollar dominate the market. Bloomberg predicts that at the start of this year, the stablecoin market capitalization was nearly 90% concentrated in two digital currencies: USD Coin (USDC) and Tether (USDT). Trump advocates for prioritizing these (and potentially other) digital currencies backed by the U.S. dollar. Experts have observed that USDT, USDC, and similar digital currencies are merely intermediate steps toward the digital dollar that the Federal Reserve intended to issue.
In response to the presidential ban on digital currency, what was the Federal Reserve’s response? Many anticipated that Federal Reserve Chair Jerome Powell would object, potentially contending that the executive order was unconstitutional. Subsequently, Powell disappointed advocates of the digital currency. During congressional hearings on February 12, 2025, he declared, “The Federal Reserve will never issue a central bank digital currency (CBDC) during my tenure.” Nevertheless, this assertion should not be regarded as a significant revelation. Powell’s tenure as Federal Reserve Chair concludes in May 2026, which provides inadequate time to execute a CBDC pilot launch, even in the absence of obstacles.
Powell has been characterized as a “compromiser” and an “opportunist” by certain advocates of a digital currency. He had already begun to imply that the Federal Reserve’s digital dollar was comparable to a “fifth wheel on a cart” prior to the congressional hearings. A CBDC would facilitate and expedite economic transactions, according to its advocates. Nevertheless, the Fed has been implementing the FedNow system, a real-time payment service for banks and businesses, since mid-2023. This service has rapidly acquired popularity in the United States. “The FedNow system already fulfills the needs,” Powell has emphasized on numerous occasions, and a digital dollar is becoming “an unnecessary product.” These statements are perceived by certain observers as an indication that the Federal Reserve is in favor of enhancing the current monetary system rather than replacing it.
Advocates of the digital currency believe that Powell has merely aligned himself with Trump. They contend that “FedNow is merely a painkiller, whereas a CBDC would serve as a genuine operational instrument.” Some even suggest that Powell not only endorses Trump but also the entire U.S. crypto industry, potentially in preparation for a lucrative post-Fed career in this sector. Powell is effectively promoting cryptocurrencies by disregarding the digital currency. Bitcoin experienced a 3% increase in value subsequent to his congressional testimony on February 12. Powell has also suggested that the Federal Reserve may permit U.S. institutions to collaborate with private digital currencies.
Proponents of CBDC in the United States are deeply worried that the Federal Reserve is relinquishing global leadership in digital currencies to China’s People’s Bank and its digital yuan. 260 million consumers are currently enrolled in the yuan’s pilot program. Although the United States dollar is dependent on SWIFT for international payments, China is in the process of establishing an alternative payment network known as “mBridge.”
The mBridge initiative enables countries to execute transactions via their CBDCs. The PBOC Digital Currency Institute of China, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the UAE, and the BIS Innovation Hub in Hong Kong are among the participants. Saudi Arabia’s central bank became a member in July 2024. BIS unexpectedly announced its withdrawal from mBridge in October of last year, which some interpret as an effort to prevent the digital yuan from challenging the U.S. dollar’s dominance.
The fate of Agora, BIS’s other significant initiative, remains uncertain. The ability of U.S. institutions to participate through stablecoins, which Trump maintains are the antithesis of a digital dollar, will be a significant factor. This ironic contradiction has yet to be resolved.