Trump’s EO 14178: Killing the Global Digital Dollar, Softly!

Quiz Question: List, in descending order of importance, the five key things or people or regulations that President Donald Trump has outlawed in his tumultuous second term?Most Likely Answer: 1) Trade with China; 2) Illegal immigrants; 3) Pro-Palestine foreign students; 4) DEI (Diversity, Equity, Inclusion) policies; and5) Paper straws and slow water showers!Hardly anybody – even among Trump’s stiffest critics – would include the Digital Dollar in the above list. Because in the mad hullabaloo of launching trade wars, serenading Vladimir Putin and tongue-lashing Volodymyr Zelensky, bombing Houthis, shaming LGBTQs, deporting students, and banishing innocent residents to El Salvadorian prisons, most people missed Executive Order 14178, prohibiting federal agencies from developing, issuing, or promoting any form of CBDC (central bank digital currency), popularly called the Digital , the Mecca of Entrepreneurial Learning, Upended by Trump & MuskWhack! With one stroke of his sky-scraper signature, Trump aborted the most critical evolution of the dollar as a 21st century global ostensible reason given is that Digital Dollars would infringe upon the privacy of individuals since the US Fed would have unconscionable surveillance powers, knowing exactly who is transacting what. While there is a sliver of apprehension here, there equally are a bunch of anonymising and masking algorithms being developed which could allay privacy as with the tariff tantrum, the real intent behind and impact of this crazy ban on Digital Dollars is utterly am I calling this move “crazy”? Because it’s clear that most cross-border transactions will shift from the current Society for Worldwide Interbank Financial Telecommunication (SWIFT) led international clearing system, with its high cost, delays, and frictional movements, to a blockchain-backed public ledger of crypto wallets/, if A, an American buyer, were to pay B, an Indian seller, via SWIFT, it could take 2-3 days as the money travels from one jurisdiction to another, from one intermediary bank to another, incurring several basis points in costs and commissions. However, with digital currencies, the same payment from A to B, provided both have wallets/accounts on a blockchain, can be done in under five seconds, with virtually zero costs!You don’t have to be a genius to infer that SWIFT’s demise is inevitable as digital currencies and blockchain platforms mature under a rapidly evolving regulatory architecture. It’s an unstoppable let’s try and figure out Trump’s mysterious ban. Having killed a US Fed-controlled Digital Dollar, Trump wants Stablecoins to take over. Stablecoins are crypto tokens which have the fiat dollar, ie the common greenback, as the underlying asset, so they are a digital proxy for the dollar. However, Stablecoins are created by several private issuers, for example Tether and USD Coin, and are not liability-backed by the US Fed. So, the first concern for any buyer of Stablecoins is trust in the issuer, its audit standards, and how robust its underlying assets are. What if a big oil trader were to buy $10 billion worth of Stablecoins to settle a purchase, but the issuer of Stablecoins were to hit a liquidity crisis, or get crippled by a cyber-attack, or worse, simply go bust! Any buyer would think a million times before risking $10 billion so Scripted the 'Great Disruption' but Must Beware of Unintended Plot TwistsBut please humour me for a minute and put the trust issue aside. Imagine that our oil trader does go ahead and buys $10 billion of Stablecoins, which are transferred to the oil seller’s crypto account. Now, the seller will have to reconvert $10 billion of Stablecoins into fiat dollars to buy US treasury bonds, which are the seller’s safe haven a cumbersome, self-defeating process! Because, driven by the need for efficiency, invoices will soon start getting raised in Stablecoins directly, and not in fiat dollars. Investors will begin demanding that they be allowed to use Stablecoins to buy US treasuries, again , Stablecoins, issued by private entities, will usurp the place of a global dollar, and the greenback will become a domestic currency, akin to a country such a dystopian future, the US Fed will lose control over the dollar’s global transactions, an outcome that the US Fed cannot permit. So, it will push new regulations sequestering Stablecoins and their reserve assets within US custody, effectively “nationalising” Stablecoins.
In the end, this inelegant, tortuous process will inflict a highly fragmented, inefficient system of nationalised Stablecoins performing the role of the now-aborted US Fed-backed Digital begs the obvious question: why ban Digital Dollars if you are destined to create a poor, struggling proxy, ie nationalised Stablecoins?It’s a question which only President Trump can while we await an answer, the Digital Yuan and Digital Euro are saddling up to dominate the digital currency battlefield of the 21st century. Watch this space.(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)