The real goal of Trump’s encryption strategy is the federal reserve

The President of the United States has stopped the central bank’s digital currency plans: just a force to undermine the independence of the federal reserve, as Ignazio Angeloni writes.

This post It was originally published With a European Policy Making Institute @ Bokkoni University.

Among the many executive orders signed by President Donald Trump in recent days, one of them is a revolution in an area that we have not expected that the new president will be concerned with: the payment system. It is worth understanding its content, because it is also suitable for us.

First of all, the request offers the final blow to the so -called digital banking currency (CBDC), also known as digital money; It has now been banned and traded in the United States.

In addition, it begins a legislative process aimed at making the United States no less than “the planet’s encryption capital” (Trump’s promise himself last year while requesting votes from bitcoin operators).

More importantly, precise reading reveals that under the technical surface, the document hides a political goal by nature: an attack on one of the last independent forces that still exist in the United States – the central bank, the federal reserve.

Let’s start with CBDC by briefly re -back. The concept of the digital currency appeared in 2019, when Mark Zuckerberg, CEO and dominant shareholder (Now Meta), announced his intention to launch a personal digital currency, LIBRA. Central bankers fear that the young businessman will steal their role.

Although the scale had critical defects that would prevent its success and was subsequently abandoned, central banks decided to seize the opportunity by studying the creation of their digital currency, CBDC.

However, the years of research did not dispel doubts about the necessity of digital criticism, partly due to its existence in some way (use by all banks) and partly because the central banks are more likely to promote the effective and safe payment system through its organization, as they already do, rather than running themselves. .

The real goal is the federal reserve
Even before the November elections, it was clear that the Federal Reserve would not move from the study stage to implementation. Did Trump made the right decision and made clarity? Not exactly. Here, two other points enter into play.

Despite the inability to predict, one may ask: How can the president who claims to want us to excel in all fields, including the dollar and the financial system behind him – the same president that he called three years ago the “fraud process”, make America the capital of the category Mysterious and unreliable finances inhabited by traders and money laundering?

The organization of encryption financing and bringing it inside the official channels is one thing, but making the country “the coding capital” seem contradictory (outside the election campaigns).

However, the close reading of the text reveals that the focus is not on Bitcoin – a common but very risky tool (in the same category is the symbols that Trump and his wife Melania launched after the elections, which have almost no value after he is promising) – but instead On the so -called stablecoins, the tools of stable value are related to dollars. Although it is not yet used for retail selling payments, it is perfectly suitable for such use in the future due to its similarity with the dollar issued by the Federal Reserve.

Doubts arise when noting that the same executive order is entrusted with the organization of the Technical Committee, including all relevant departments and agencies, with the exception of the Federal Reserve. This is unprecedented, as the Federal Reserve was always part of the presidential groups that were created by the president, from the introduction that Ronald Reagan held in the eighties of the last century after the Black Monday, which is still present with Stablecoins, to those created by Barack Obama after the finance is a calamity. With the exception of the Federal Reserve of this new initiative is an important institutional anomalies.

What allows Trump this insult is the mysterious legal framework that governs the payment system in the United States, with ancient laws of ages when the sector was completely different, digitization was not present, and checks still dominate transactions.

In comparison, the European framework is more clear; The treaty and the European Central Bank system appoint the Central Bank of “enhancing the smooth operation of the payment systems” (note the plural). The central bank should always be consulted about matters as efficiently; Its “views” outside the scope of decision -making are not binding but it bears the effect.

While the various institutional framework limits the impact of American monetary decisions on Europe, the fact remains that in a coherent global monetary system, the decisions of the “basic actor” affect others. The suspension of the digital dollar will lead to a reflection between other central banks that, after years of preparatory studies, has not yet decided whether the new tool will be launched.

One of the advantages of the digital currency must be the ability to operate, for example, the relationship between the digital currencies established by the various central banks, providing a safe and multinational network that is included in the central banks, facilitating global payments across the borders, and reducing their costs. Without the dollar, this contact loses a lot of its importance.

What to do? The European Central Bank has so far been the most designed supporter of the new Western Central Bank tool. Perhaps he should reconsider.

Authors ’disclosure: The authors clarify any conflict of interests. You can read our disclosure policy here.

Articles represent the opinions of their book, and not necessarily the views of the University of Chicago, Bath College of Business, or the teaching staff.