Donald Trump said this week that he would never allow the government to issue its own digital currency. But what the cryptocurrency industry might really want is for the former president to stop the White House's current aggressive enforcement actions.
There are reasons to doubt that this will happen, even under a second Trump administration.
Trump said this week that he would never allow the launch of a US central bank digital currency, sometimes referred to as a “digital dollar.” At least 130 countries, including members of the European Union, the United Kingdom and China, are in various stages of researching or issuing central bank digital currencies, according to the Atlantic Council.
In the United States, the Federal Reserve has been experimenting with different forms of central bank digital currencies, though its leaders have said the central bank would not issue one without support from the White House and Congress.
“Such a currency would give our federal government absolute control over your money,” Trump said in New Hampshire. “They could take your money. You wouldn't even know it was gone. That would pose a serious threat to freedom.”
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These statements came at an odd time, given that a central bank digital currency (CBDC) is not on the horizon. These changes may reflect the influence of former Republican presidential candidate Vivek Ramaswamy, who immediately became a surrogate for the Trump campaign after dropping out of the race. In an interview with Fox News, Ramaswamy said he discussed opposition to central bank digital currencies with Trump shortly before the former president announced he would oppose them.
Central bank digital currencies can be designed with different levels of government oversight or control. On one end of the spectrum, a central bank can host people's wallets, and inject or remove digital money to achieve policy goals. On the other hand, a central bank digital currency can be designed to be as anonymous as other forms of cash.
The Fed is no closer to settling on any one regime. In addition to saying they would wait for policy input, Fed officials said the issuance of a central bank digital currency would be years away.
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Trump's stance has been welcomed by some in the cryptocurrency industry because a central bank digital currency would compete with other cryptocurrency products such as stablecoins, whose value is often tied to the dollar. It would matter less if the Fed issued cryptocurrencies directly.
The largest stablecoin is issued by Tether and has a market cap of about $95 billion. Circle Internet Financial, which said this month it would seek to become a public company, is backing the USDC
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The second largest stablecoin is worth $25.5 billion.
Of more interest to the cryptocurrency industry is whether the election will derail SEC Chairman Gary Gensler's aggressive enforcement efforts against various projects and platforms. To that end, there are reasons why the industry can't move forward, according to TD Coin policy analyst Garrett Seaberg.
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The first is that Gensler's term does not end until June 2026, although Gensler may choose to step down before then. The SEC did not immediately respond to a request for comment.
It is also not clear that cryptocurrencies will be a major priority for the Trump administration. The direction of policy will depend on who Trump appoints to the Securities and Exchange Commission, the Commodity Futures Trading Commission, and other agencies.
“It is not at all certain that the Trump team will want to take on the political responsibility that comes with unilateral actions to promote cryptocurrencies,” Seberg wrote in a research note this week.
Write to Joe Light at joe.light@barrons.com
