Trump Against CBDCs.

The former president of the United States and candidate for reelection in 2024, Donald Trump, has promised that he will “never allow” the creation of a central bank digital currency (CBDC) in the country, in a speech that has caused a stir among defenders and detractors of cryptocurrencies.

CBDCs are digital forms of a country's fiat currency, which have been issued by a central bank and are therefore a digital representation of fiat money. That is, this type of currency has the property of being regulated by a state or a union of states. These differ from traditional cryptocurrencies, such as bitcoin or ethereum, in that the latter are decentralized, that is, they do not depend on any central authority for their issuance, validation or control. In addition, cryptocurrencies are usually based on blockchain technology, which allows the creation of distributed, immutable and transparent records of transactions.

Central banks around the world are currently exploring the possibility of issuing their own CBDCs, with the aim of improving the payment system, given the increase in electronic payments and the decrease in the use of cash, but also because the creation of unregulated private electronic payment instruments, such as stablecoins, can put financial stability at risk.

However, CBDCs also pose a number of challenges and risks, both technical, legal, economic and social. For example, it is questioned how a CBDC would affect the privacy of users, as the central bank would be able to access all the information on their financial movements. It is also debated how the security and interoperability of CBDCs would be guaranteed, as well as their compatibility with the existing regulatory framework. In addition, there are fears that a CBDC could cause a flight of deposits from commercial banks to the central bank, which would reduce their ability to grant credit and affect monetary policy.

Trump made his promise to veto CBDCs during a campaign rally in Portsmouth, New Hampshire, on January 17, where he said: “...tonight I will make another promise to protect Americans from government tyranny. I will never allow the creation of a central bank digital currency…” His statement was received with loud applause, to which Trump responded: “...I didn't know they knew so much... There are very intelligent people in New Hampshire...”, before continuing to explain: “...A coin thus it would give a federal government, our federal government, absolute control over its money. "They could take your money, and you wouldn't even know it was missing...", “...It would be a dangerous threat to freedom, and I will prevent it from reaching the United States...”, he stated.

The cryptocurrency market's reaction to Trump's statements was mixed. On the one hand, the TRUMP cryptocurrency experienced a 50% increase after the former president's statement on CBDCs. On the other hand, bitcoin and many cryptocurrencies suffered relatively significant falls in the hours after the speech, which could be due to uncertainty about the future of regulations in the United States. The TRUMP cryptocurrency is part of Operation MAGA, which is an acronym for “Make America Great Again” and currently consists of three AI MVPs (minimum viable products).

The opinions of “experts” about CBDCs and the future of cryptocurrencies are varied and depend on various factors, such as the political, economic and social vision of each one, as well as the interests of the different actors involved. Some see CBDCs as an opportunity to modernize the financial system, increase financial inclusion, reduce transaction costs, improve efficiency and transparency, and facilitate innovation. Others see them as a threat to monetary sovereignty, privacy, competition, financial stability and individual freedom.

Regarding the future of cryptocurrencies, there are opinions that consider that CBDCs could boost their adoption, by generating greater trust and familiarity among users, as well as by creating a digital infrastructure that facilitates their use. Others believe that CBDCs will only serve to displace or restrict cryptocurrencies by offering a more secure, regulated and state-backed alternative. What seems clear is that CBDCs and cryptocurrencies are two phenomena that are changing the global monetary and financial landscape, and that they pose significant challenges and opportunities for governments, central banks, commercial banks, companies, investors and investors citizens.

What do you think?

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