Opinion | Trump’s digital dollar ban opens the door for China’s yuan

The US president’s decision to halt CBDC development may inadvertently hasten the de-dollarisation trend, smoothing path for yuan internationalisation

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China’s app for the digital yuan is seen on a mobile phone next to 100-yuan banknotes. Photo: Reuters

Published: 4:30pm, 4 Feb 2025

On January 23, US President Donald Trump issued an executive order creating a working group for a regulatory framework for digital assets. Ironically, this order also imposed a ban on US central bank digital currency (CBDC) development, effectively halting plans to create a digital version of the dollar.

This decision could unintentionally accelerate global de-dollarisation, as countries and businesses may increasingly turn to alternatives like China’s digital yuan for cross-border transactions, further diminishing the dominance of the US dollar in international trade.

As highlighted by the World Economic Forum in April last year, over 98 per cent of the global economy’s central banks have been involved in the development of a CBDC. However, in light of the American prohibition on CBDC development, this number has most likely dropped.

While services like FedNow, a Federal-Reserve-backed instant payment service released in 2023, do exist for domestic American transfers, a CBDC would better enable cross-border trade and instantaneous settlement for individuals, institutions and governments alike.

Historically, China has been at the forefront of CBDC development, with work starting on the e-CNY in 2014. The digital yuan was a natural, government-backed extension of Chinese payment trends, with e-payments already popular due to a combination of factors, including China’s development as a mobile-first society, its heavy focus on e-commerce, and high levels of bank account ownership among the population.

The 2022 Beijing Winter Olympics also helped spur international knowledge and domestic usage of the e-CNY.