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President Trump has issued an executive order that prohibits the US government from issuing a central bank digital currency (CBDC). He has also reset the legislative agenda on digital assets, including stablecoins.
On Thursday (January 23), Trump signed off an executive order that aims to "strengthen American leadership in digital financial technology”.
Among its provisions, the order bans the US government from issuing its own CBDC, and prohibits the use of foreign CBDCs within US jurisdiction.
The order notes that CBDCs threaten "individual privacy”, the “stability of the financial system” and the “sovereignty of the United States”.
In contrast to the ban on CBDCs, the Trump White House appears to be strongly in favour of privately-issued US dollar stablecoins.
The order notes that such stablecoins can “promote” and “protect” the sovereignty of the US dollar.
It therefore calls for the use of “lawful” and “legitimate” US dollar stablecoins to be encouraged “worldwide”.
New working group with legislative clout
To that end, President Trump has authorised the creation of a new Working Group on Digital Asset Markets, which will be chaired by David Sacks, Trump’s special advisor for AI and crypto.
In addition to Sacks, the working group will include the heads of the Treasury, the Department of Justice (DOJ), the Securities and Exchange Commission (SEC) and several other agencies as members.
Within 30 days of the order, the working group will identify “all” regulations and guidance that currently affect the digital asset sector.
Within 60 days of the order, each agency that is part of the working group must submit to the chair recommendations on whether these existing regulations should be rescinded or modified.
Subsequently, the working group will propose a federal regulatory framework governing the issuance and operation of digital assets, including stablecoins, in the US.
“The Working Group’s report shall consider provisions for market structure, oversight, consumer protection, and risk management,” the order notes.
Finally, the working group will also evaluate the possibility of a national stockpile of digital assets, potentially derived from crypto-assets seized by the US government.
Impact on existing legislative proposals
The new framework for digital assets that will be proposed by the working group looks likely to override similar legislation that has already been introduced to Congress, and that almost certainly would have passed.
The Financial Innovation and Technology for the 21st Century Act (FIT Act), for example, offers a comprehensive framework for digital asset market structure, consumer protection and prudential standards.
In May 2024, the FIT Act was passed by the House of Representatives in a unanimous, bipartisan vote.
In September, it was received in the Senate and read twice by the Senate Banking Committee, before being put on hold during the final stages of the presidential election.
Similarly, the Clarity for Payment Stablecoins Act offers a comprehensive framework for stablecoin issuers, covering reserve asset requirements, transparency rules and consumer protection rights.
In July 2024, the act was marked up by the House Financial Services Committee, after which it was placed on the Union Calendar for debate and a future vote in the House.
Although both of these bills looked set to be enacted under the new administration, the executive order indicates that the White House has other plans.
Howard Lutnick conflict of interest
It should also be noted that Trump’s commerce secretary, Howard Lutnick, will be a member of the working group that will develop the new legislative proposals.
Lutnick serves as chair and CEO of Cantor Fitzgerald, the investment firm that he founded and that custodies the reserve assets of Tether, the world’s largest stablecoin issuer. (Lutnick has said he will resign form this position once his appointment is confirmed by the Senate.)
Cantor has been a Tether custodian since early 2021, helping to manage the firm’s purported holdings of US Treasury bills.
In its most recent attestation report, published in September 2024, Tether claimed to have $85bn in US Treasuries backing its stablecoin, although the company’s financials have still never been audited.
Lutnick has previously downplayed Tether’s lack of audited financial statements with assurances that Cantor has “seen the money and they have it”.
Prior to Lutnick’s nomination, the Wall Street Journal (WSJ) reported that it had direct knowledge of a US criminal investigation into Tether for money laundering failures and sanction evasion.
Tether dismissed the report as “rank speculation”.
Lutnick will also be involved in devising legislative proposals for the crypto-asset markets, which will include Bitcoin.
Previously, Lutnick has disclosed that Cantor owns a “shed load” of Bitcoin.
Tether, likewise, holds almost $5bn of Bitcoin in its reserves — an arrangement that is unlikely to be permissible under future legislation.
