Donald Trump Is the Latest Republican to Use CBDCs as a Dog Whistle

With Donald Trump romping to victory in Iowa’s caucus on Monday and taking the stump in New Hampshire, the next primary battleground, “45” made a strong statement about digital currency: he’s against it. At least the government-issued kind, in the form of a central bank digital currency (CBDC):

“Tonight, I’m also making another promise to protect Americans from government tyranny. As your president, I will never allow the creation of a central bank digital currency,” he said Wednesday night.

“A digital currency would give our federal government absolute control over your money. They could take your money [and] you wouldn’t even know that it was gone. This would be a dangerous threat to freedom and I would stop it,” Trump added.

Trump joins many other leading Republicans in coming out against a CBDC. Florida governor Ron DeSantis, who came second to Trump in Iowa, was the first major candidate to speak out in opposition. Vivek Ramaswamy, a Bitcoin advocate, has said “hell no” to one. Tom Emmer, the House Whip, introduced a bill in Congress to ban a U.S. CBDC. Senator Ted Cruz of Texas did something similar in the upper chamber. North Carolina's House of Representatives passed a bill to outlaw a so-called “digital dollar” there.

Trump’s opposition to a CBDC may be prompted by Ramaswamy’s endorsement of his candidacy following the latter’s poor showing in Iowa. But, Trump’s opposition to a CBDC is a little curious, given everything else happening in the U.S. and the world at the moment. The Federal Reserve currently has no actual plans for a CBDC. The most any U.S. official has said in support is to say the United States should be investigating and testing the idea. Trump is dismissing a government policy that isn’t currently a government policy and doesn’t look like becoming a policy any time soon.

In fact, he nodded to this strange reality in the speech, acknowledging that many in the audience might not know much about CBDCs, one of the more arcane and slow-moving innovation areas of the digital currency landscape.

Read more: Emily Parker – Central Bank Digital Currencies Are Unexpectedly Becoming a Presidential Election Issue

“I didn’t know you knew so much,” Trump said as the crowd cheered. “New Hampshire – very smart people. Very current. You know what they are doing.” [“They” being the federal government.]

It’s true that CBDCs are a popular proposal in many other countries. China, the Bahamas, Jamaica and Nigeria have already introduced working CBDCs.

Central bankers in Brazil, China, the Euro area, India and the U.K. are further along in the research and development phases of launching CBDCs. More than 100 countries are in the exploration stage, according to the International Monetary Fund.

So why is Trump speaking on an issue that voters seem not to care greatly about, an issue that isn’t particularly “live” as a substantial real-world possibility?

My colleague, Emily Parker, looked into the debate in May last year and predicted it would become a talking point on the campaign trail. “Expect this CBDC issue to become a presidential campaign talking point,” Ron Hammond, director of government relations at Blockchain Association, told Parker. “Perfect intersection of fear of government, China and finance collapse with the bank crisis.”

In other words, a CBDC, which would see the Federal Reserve issue a digital version of the greenbacks in your wallet, is a dog-whistle issue. Speaking about it allows candidates to display their opposition to government interference, while implicitly aligning themselves with the cause of personal freedom. Cash, while less useful monetarily, is a tangible form of self-sovereignty. A dollar in your pocket is the ultimate “bearer asset;” it can only be taken away by persuasion, or force.

It’s an open question whether a U.S. CBDC would really give the government control over your money. It would depend on how the dollar was issued and who would have access to the wallets it was stored in. Advocates for a digital dollar, including former Commodity Futures Trading Commission (CFTC) Chair Chris Giancarlo, who leads the pro-CBDC Digital Dollar Project, argue that it could be privacy-protecting, while advancing financial inclusion and promotion of the dollar (and U.S. power) around the world. It seems likely, if a CBDC was enacted here, that it would be “intermediated” by the private sector, notably by stablecoin issuers, such as Circle, the company behind USDC, which has a roughly $25 billion market cap and plenty of adoption around the world.

But it also seems likely the Federal Reserve would protect its role as a censor of certain undesirable transactions, including money laundering and terrorist financing. That power would open the door to officials arbitrarily block transactions it doesn’t approve of, giving us an “Operation Choke Point” on steroids. But, again, this is all largely conjecture. There’s no concrete policy on CBDCs currently for us to debate.

Still, Trump’s blanket opposition to a CBDC could have real consequences. It’s likely to make introducing one more difficult and to make Circle’s, and other stablecoin issuers’, lives easier (Circle is against a government-controlled CBDC, for obvious reasons).

What that means for permissionless cryptocurrencies, such as bitcoin (BTC), is another open question. Politico argued recently that Trump 2.0 would be good for crypto, releasing the shackles placed on the industry following 2022’s epic scandals (“Donald Trump may be crypto’s unexpected savior.”) But, again, this is all conjecture. Trump was said to be a better candidate for crypto in 2016 and turned out fiercely against financial freedom when he got into the office.

As with most things Trump says: Take it with a pinch of salt. But, given the lockstep opposition to CBDCs in Republican circles now, don’t go betting on a digital dollar anytime soon. There are few votes available for coming out in favor of one, but there may be plenty of political hay to be made in opposition to one.