Digital Dollar

The Digital Dollar refers to proposals for a U.S. central bank digital currency that would function as digital form of the U.S. dollar issued directly by the Federal Reserve, explored through the Digital Dollar Project, a non-profit initiative working with the Federal Reserve to test digital cash mechanisms for domestic and cross-border payments.

In 2025, an executive order banned any federal issuance of a CBDC, citing privacy concerns about government surveillance of transactions and sovereignty concerns about central bank control over individual financial activity. The ban redirects U.S. digital currency strategy toward promoting privately-issued, regulated USD-backed stablecoins like USDC and USDT operating under existing money transmission and securities frameworks rather than creating new central bank digital money.

The policy shift reflects political opposition to CBDC models perceived as enabling government overreach, preference for private sector innovation over government-issued digital money, and commitment to preserving role of commercial banks in monetary system rather than enabling direct Federal Reserve accounts for citizens. Implications include U.S. ceding CBDC development to other jurisdictions including China, EU, and UK while relying on stablecoin ecosystem subject to MiCA-style regulations, potential competitive disadvantages in cross-border payment infrastructure if other nations develop interoperable CBDC networks, and continued dependence on commercial banking intermediaries for digital payment innovation. The ban does not prevent Federal Reserve research on CBDC technology or participation in international CBDC projects like BIS Innovation Hub initiatives focused on wholesale rather than retail applications.