Whack! With one stroke of his sky-scraper signature, Trump aborted the most critical evolution of the dollar as a 21st century global currency.
The 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 fears.
So as with the tariff tantrum, the real intent behind and impact of this crazy ban on Digital Dollars is utterly unfathomable.
Why 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/accounts.
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 phenomenon.
Now 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 cavalierly.