U.S. CBDC Ban Accelerates Europe, China's Digital Currency Advances

The executive order issued by the White House in late January, which revoked EO 14067 and disbanded the “responsible digital-asset” framework, has had significant implications for the development of a central-bank digital currency (CBDC) in the United States. The order not only prohibited the Federal Reserve from issuing, piloting, or promoting a CBDC but also barred every U.S. agency from engaging in such activities. This move has effectively ceded the initiative to other regions, particularly Europe and China, which are rapidly advancing their own CBDC projects.

By pulling the Federal Reserve out of key projects like Project Cedar and Project mBridge, and by gagging Treasury officials involved in cross-border dollar pilots, the U.S. has allowed Europe and China to take the lead. Europe is racing to finalize a “digital euro,” while China is already using e-CNY for various transactions, including oil payments. This shift has significant implications for the global financial landscape, as the U.S. dollar's dominance in cross-border payments could be challenged by these new digital currencies.

The White House framed the ban as a defense of civil liberties and a signal to Silicon Valley that private tokens, not state ones, should drive U.S. fintech leadership. However, the order fused two different fears: legitimate concerns about government surveillance through a digital ledger and a more nebulous worry that programmable money erodes individual autonomy. European architects of the digital euro, who have built privacy features into their design, have criticized this comparison.

Even before the U.S. exit, 134 countries, representing 98 percent of global GDP, were exploring CBDCs. The absence of the world’s reserve-currency issuer has accelerated this work. In Brussels, the European Commission unveiled an almost-final draft of the digital-euro bill and instructed the ECB to pick technology partners by early autumn. The target is a limited consumer pilot in late 2026, roughly the date the Fed might have begun its own sandbox had the ban not intervened.

China, which already has 260 million domestic users of the e-CNY, is also moving forward with its CBDC. The departure of U.S. observers from mBridge has handed China the co-chair, and test nodes in Hong Kong and Shenzhen are now routing limited oil-payment traffic to gauge FX-liquidity dynamics. London, freed from what one banking veteran described as “Washington’s gravitational hesitation,” is also leaning in, with the BoE detailing offline-payment experiments and confirming work on an interoperability layer that could dovetail with an eventual digital euro.

Even BRICS finance ministers, gathering in Rio, resumed talk of interlinked CBDCs that might lower dollar dependency. Brazil has retreated from the headline idea of a “BRICS Coin,” but India, the UAE, and South Africa have individual projects in motion. The ministers’ communique referenced “interoperable public-money platforms” three times, indicating a shared interest in this direction.

While central banks abroad accelerate, private tokens at home are filling the domestic void. Circle’s USDC, PayPal’s PYUSD, and newcomer Mountain Protocol, an SEC-registered 1:1 tokenized Treasury product, hit combined record on-chain volume in March. Exchanges report that more than 90 percent of crypto trades now settle in stablecoins rather than fiat pairs. Congress is inching toward the first bipartisan stablecoin bill, which could result in a peculiar posture: public payments denominated in private tokens, while the rest of the world rolls out public tokens that ride over private rails.

Two numbers matter in cross-border payments: speed and cost. The BIS has modeled multi-CBDC corridors that compress settlement windows from two days to two seconds and shave up to 60 percent off all-in fees. Those gains come from synchronized ledgers, atomic FX swaps, and liquidity-saving algorithms that net balances across jurisdictions, features impossible to graft onto SWIFT in its current form. If digital euros and e-yuans gain traction while the dollar sticks to legacy rails, American corporates will feel it first. A survey found U.S. multinationals already extending FX hedges because tariff volatility under the new administration magnifies dollar swings. Add the cost of converting into CBDC units for counterparties in Asia or Europe, and treasurers could find invoicing in local-currency tokens cheaper and more predictable. Every such invoice marginally erodes dollar demand.

Technology standards amplify the danger. In payments, whoever writes the rules embeds their domestic preferences in code. Today, standards bodies are hammering out privacy, messaging, and liquidity templates for CBDCs. With the Fed absent, proposals drafted in Frankfurt, Zurich, or Hong Kong face less resistance. Once finalized, those templates become the on-ramp for wallet vendors, AML analytics firms, and identity providers. American companies can still participate, but under someone else’s rules—and likely after paying licensing fees.

U.S. bankers are preparing for a post-dollar core. One New York CTO said his institution is doubling its Real Time Payments budget and building an in-house atomic-swap module that could, someday, bridge tokenized deposits to foreign CBDCs, even if domestic regulators never issue one. Another, at a West-Coast payments processor, is lobbying for a “synthetic CBDC” model: tokenized commercial-bank money 100 percent backed by Fed master-account balances. These tactical hedges share a theme: if the digital dollar does not exist, create functional equivalents. Yet none solve the soft-power challenge. A tokenized deposit, no matter how cleverly wrapped, is still a claim on a single private bank. From a foreign regulator’s viewpoint, accepting it as collateral is a bigger leap than accepting liabilities of the U.S. central bank.

If a future administration rescinds the ban, the Fed would restart from a cold engine while Europe pilots consumer wallets and China clears oil in e-CNY. Technical catch-up is possible; losing agenda-setting power is harder to reverse. Even a 2028 pilot would leave at least three critical years in which BIS corridor work, European privacy norms, and Asian offline-payment standards evolve without U.S. input. Domestic politics complicate any pivot. Having branded CBDCs un-American, lawmakers would need to perform rhetorical gymnastics. An independent Fed could, in theory, resume research without explicit White House blessing, but senior staff worry about sparking a constitutional fight over monetary powers during an election cycle.

Money is both infrastructure and story. The physical dollar succeeded not only because it cleared debts but because people believed in the institutions behind it. Digital money is likely to obey the same rule: protocols that knit together identity, credit scoring, and real-time settlement shape global commerce far beyond the mechanics of moving bits. By forbidding a digital dollar, Washington intended to preserve that story: liberty, privacy, entrepreneurial zeal. Ironically, the ban may hand narrative control to jurisdictions more comfortable with state-directed standards. If the next generation of cross-border rails is written in Brussels, Shenzhen, or Riyadh, the dollar could be relegated to just one more token on someone else’s ledger, accepted out of habit rather than structural necessity.

The situation could be likened to the invention of container shipping. The U.S. Navy ruled the waves, but the first international container standard emerged from a small committee chaired by a Swedish port operator, because America was busy elsewhere. Within ten years, containers doubled global trade and re-wired supply chains. Nations that adopted the box early gained outsized influence over ports, shipyards, and, eventually, data interchange. Nations that dithered played catch-up for decades. CBDCs may or may not prove as revolutionary, but the logic rhymes: protocol beats product, and presence beats prowess. Right now, the United States is choosing absence. Unless that choice changes, the world will move on - and the dollar’s network effects, painstakingly built over a century, could erode not through hostility but through indifference.