US Halts Digital Dollar (CBDC) Research: Policy Reversal Explained

Economy | Updated Dec 14, 2025 (America/New_York)

US Halts Digital Dollar (CBDC) Research: Policy Reversal Explained

In a significant reversal of previous policy, the White House has issued a new executive order halting all federal research and development into a U.S. Central Bank Digital Currency (CBDC), often called a 'digital dollar'. The order, signed in early 2025, dismantles the framework established by the prior administration and prohibits agencies from any actions to establish, issue, or promote a CBDC. This move shifts the nation's focus toward private-sector digital assets, particularly stablecoins, aiming to position the U.S. as a global leader in digital finance innovation while raising profound questions about the future of money in America.

• What Happened: A new administration issued an executive order in January 2025 to halt all federal work on a Central Bank Digital Currency (CBDC) and revoked the previous administration's executive order that had encouraged its exploration.
• Where: The policy change affects all U.S. federal agencies, including the Treasury Department and the Federal Reserve, which had been actively researching a potential digital dollar.
• Why It Matters: The decision marks a major pivot in U.S. digital currency policy, prioritizing private-sector innovation like stablecoins over a government-issued digital currency. It halts years of research and places the U.S. on a different path from other major economies like China and the European Union, which are actively developing their own CBDCs.
• What's Next: A new Presidential Working Group on Digital Asset Markets has been established to propose a new federal regulatory framework for digital assets, with a focus on stablecoins. Congress continues to debate the issue, with various legislative proposals reflecting the deep political divisions over the concept of a digital dollar.

What we know right now

In a decisive policy shift in January 2025, the White House issued an executive order titled 'Ensuring U.S. Leadership in Digital Financial Technology'. This order explicitly prohibits federal agencies from undertaking any action to establish, issue, or promote a Central Bank Digital Currency (CBDC) in the United States or abroad. The directive immediately terminates all ongoing plans and initiatives related to the creation of a U.S. CBDC.

This move formally revokes the previous administration's March 2022 Executive Order 14067, which had called for a whole-of-government approach to the responsible development of digital assets and directed agencies to explore the potential creation of a U.S. CBDC. Also rescinded was the Treasury Department's subsequent 'Framework for International Engagement on Digital Assets'. The new policy frames the previous administration's approach as one that 'suppressed innovation and undermined U.S. economic liberty'.

The Federal Reserve had been actively researching the pros and cons of a CBDC, releasing a key discussion paper in January 2022 titled 'Money and Payments: The U.S. Dollar in the Age of Digital Transformation'. This paper outlined potential benefits, such as improving financial inclusion and the efficiency of payments, alongside significant risks related to financial stability, user privacy, and monetary policy implementation. The Fed had consistently stated it would not proceed with issuing a CBDC without clear support from the executive branch and an authorizing law from Congress.

A major research initiative, Project Hamilton, a collaboration between the Federal Reserve Bank of Boston and MIT's Digital Currency Initiative, had explored the technical feasibility of a CBDC. The project, which concluded in late 2022, developed and tested open-source software (OpenCBDC) for a core transaction processor, demonstrating that a centralized system could handle upwards of 1.7 million transactions per second. However, the project's findings also highlighted that a distributed ledger architecture, similar to those used by cryptocurrencies, created performance bottlenecks and was less suitable for a centrally administered system.

The new executive order establishes a 'Presidential Working Group on Digital Asset Markets' to develop and recommend a new regulatory framework for the digital asset sector, with a clear emphasis on supporting private-sector innovations like stablecoins. The administration's stated goal is to make the United States the 'crypto capital of the planet' by halting what it terms 'aggressive enforcement actions and regulatory overreach'.

What’s confirmed vs. still developing

Timeline of events

• January 20, 2022: The Federal Reserve releases its discussion paper, 'Money and Payments: The U.S. Dollar in the Age of Digital Transformation,' outlining the pros and cons of a potential U.S. CBDC and opening the topic for public comment.
• February 3, 2022: The Federal Reserve Bank of Boston and MIT announce the initial findings of 'Project Hamilton,' detailing the successful test of a high-performance transaction processing system for a hypothetical digital dollar.
• March 9, 2022: The Biden administration issues Executive Order 14067, 'Ensuring Responsible Development of Digital Assets,' directing federal agencies to study the risks and benefits of cryptocurrencies and to explore a CBDC.
• September 16, 2022: The U.S. Treasury Department releases a report, 'The Future of Money and Payments,' which recommends advancing work on a possible U.S. CBDC in case it is determined to be in the national interest.
• December 22, 2022: The Federal Reserve Bank of Boston and MIT announce the conclusion of Project Hamilton, having completed their joint research into the technical feasibility of a CBDC.
• July 20, 2023: The Federal Reserve launches the FedNow Service, an instant payment infrastructure for banks and credit unions. Officials clarify it is not a CBDC but a payment service.
• January 23, 2025: The Trump administration issues a new executive order, 'To Establish United States Leadership in Digital Financial Technology,' which revokes the previous order and prohibits all federal agencies from working on a CBDC.
• July 30, 2025: The new Presidential Working Group on Digital Asset Markets releases its recommendations, outlining a framework focused on strengthening the role of the U.S. dollar through the adoption of dollar-backed stablecoins.

The bigger picture

The Global Race and Domestic Debate

The U.S. policy reversal on a CBDC does not occur in a vacuum. It represents a significant divergence from the path being pursued by other major global economies. The People's Bank of China has been a frontrunner, with its digital yuan (e-CNY) pilot expanding to millions of users for domestic retail transactions, payment of salaries, and cross-border experiments. China's stated goal is to increase the international use of its currency and create alternatives to the U.S. dollar-dominated global payment system.

Similarly, the European Central Bank (ECB) is moving forward with its digital euro project. After completing an investigation phase, the ECB has entered a preparation phase, with the goal of being ready for a potential first issuance around 2029, pending legislative approval. The project aims to ensure Europe's monetary sovereignty and foster innovation in a payments market currently dominated by non-European companies.

The Philosophical Divide in the U.S.

Domestically, the debate over a digital dollar is deeply intertwined with political and philosophical disagreements about privacy, the role of government, and financial freedom. Proponents of a CBDC, as outlined in earlier Federal Reserve and Treasury reports, argued it could offer a universally accessible, risk-free form of public money, potentially improving financial inclusion for the unbanked and making payment systems faster and cheaper. A CBDC could also help maintain the international prominence of the U.S. dollar in a world where other countries are issuing digital currencies.

However, opponents voice strong concerns about the potential for government surveillance and control. A key fear is that a programmable, government-run digital currency could allow the federal government to track all transactions and potentially even block or restrict purchases, giving it 'absolute control' over citizens' money. These privacy concerns have been a major driver of legislative efforts to ban or restrict the Federal Reserve's authority to issue a CBDC without explicit congressional authorization. The new administration's policy aligns with this viewpoint, arguing that a CBDC could 'threaten the stability of the financial system, individual privacy, and the sovereignty of the United States.'

Impact analysis

Impact on Consumers and Privacy

For the average American, the halt on CBDC research means the prospect of a government-provided digital wallet is off the table for the foreseeable future. The primary impact revolves around privacy. A key argument against a CBDC was that it could create a centralized ledger of all citizen transactions, accessible to the government. The current policy pivot toward private stablecoins and other digital assets shifts the privacy debate. While it avoids direct government surveillance via a CBDC, it raises questions about the data collection practices of the private companies that will issue and manage these assets. The new regulatory framework will be crucial in determining what privacy protections consumers will have in a market dominated by private digital currencies.

The Future of the Banking Sector

Commercial banks faced a significant potential disruption from a U.S. CBDC. One of the core risks identified by the Federal Reserve was 'disintermediation'—the possibility that individuals and businesses would pull their deposits from commercial banks and hold them directly with the Fed in the form of a digital dollar. This could fundamentally alter the banking system's structure and reduce banks' ability to lend. The new policy removes this direct threat, likely providing relief to the traditional banking sector. However, it also accelerates the rise of stablecoin issuers and other fintech firms, which will present a different set of competitive challenges to banks in the payments space.

Financial Inclusion: A Contested Goal

One of the primary stated benefits of a CBDC was its potential to promote financial inclusion. Proponents argued that a digital dollar could provide the 5% of unbanked U.S. adults with direct access to the financial system through a simple digital wallet, reducing their reliance on costly alternatives. However, critics questioned whether a CBDC would truly address the core reasons people remain unbanked, such as a lack of trust in financial institutions (including the government) and privacy concerns. The shift to a private-sector-led model means that any gains in financial inclusion will now depend on the products and services developed by fintech companies and whether they can effectively reach and serve these underserved communities.

The U.S. Dollar on the World Stage

The decision to forgo a CBDC while competitors like China and the EU move forward could have long-term geopolitical consequences. A key motivation for exploring a digital dollar was to ensure the U.S. could set international standards for digital currency and maintain the dollar's central role in the global financial system. By stepping back, the U.S. may have less influence over the design and governance of the emerging global digital currency infrastructure. China is actively promoting the e-CNY for international trade to reduce reliance on the dollar and SWIFT. The new U.S. strategy bets that dollar-backed stablecoins, issued by private companies, can be a more effective tool for projecting American financial leadership than a government-run CBDC.

What to watch next

• Release of the Digital Asset Framework: The Presidential Working Group on Digital Asset Markets is tasked with submitting a report with legislative and regulatory recommendations. The contents of this report will set the detailed policy agenda for the administration's approach to cryptocurrencies and stablecoins.
• Congressional Action: The debate in Congress is far from over. Watch for continued legislative efforts, such as the 'CBDC Anti-Surveillance State Act,' which aims to prohibit the Fed from issuing a retail CBDC, and other bills that may seek to regulate stablecoins. The outcome of these debates will determine the long-term legal status of digital currencies in the U.S.
• International Response: Monitor the progress of China's e-CNY and the EU's digital euro. Key developments to watch include their adoption rates, use in cross-border transactions, and any statements from international bodies like the G20 or the Bank for International Settlements regarding the U.S. policy shift.
• Private Sector Innovation: With the threat of a public CBDC removed, observe how U.S. fintech and financial firms accelerate their development of stablecoins and other digital payment solutions. Their ability to innovate while ensuring stability and consumer protection will be critical to the success of the new U.S. strategy.
• Federal Reserve Stance: While the executive order prohibits the Fed from working on a CBDC, the central bank will continue to play a crucial role in overseeing the banking system and payment infrastructure, including the FedNow service. Look for statements from Fed officials on how they plan to manage the risks and opportunities presented by a rapidly growing stablecoin market.

FAQ

Quick glossary

• Central Bank Digital Currency (CBDC): A digital form of a country's fiat currency that is a direct liability of the central bank.
• Stablecoin: A type of cryptocurrency whose value is pegged to another asset, typically a major fiat currency like the U.S. dollar, to maintain a stable price.
• Disintermediation: In the context of a CBDC, the risk that consumers would move their money from commercial bank deposits to CBDC accounts held directly with the central bank, reducing the role of traditional banks in the financial system.
• FedNow Service: An instant payment service launched by the Federal Reserve in 2023 that enables financial institutions to process transactions in near real-time, 24 hours a day, 7 days a week. It is a payment rail, not a form of currency.

Sources

1. The White House — Fact Sheet: Executive Order to Establish United States Leadership in Digital Financial Technology (2025-01-23T12:00:00Z)
2. Federal Reserve — Money and Payments: The U.S. Dollar in the Age of Digital Transformation (2022-01-20T12:00:00Z)
3. U.S. Department of the Treasury — The Future of Money and Payments (2022-09-16T12:00:00Z)
4. Federal Reserve Bank of Boston — Project Hamilton Phase 1 Executive Summary (2022-02-03T12:00:00Z)
5. Banking Dive — Trump order embraces stablecoins, bars CBDCs (2025-01-24T12:00:00Z)
6. Independent Community Bankers of America (ICBA) — President Trump creates crypto council, bans CBDC (2025-01-24T12:00:00Z)
7. European Central Bank — Progress on the digital euro - European Central Bank (2025-12-14T12:00:00Z)
8. Federal Reserve — Is the FedNow Service replacing cash? Is it a central bank digital currency? (2023-07-20T12:00:00Z)
9. JD Supra — President Trump Issues Executive Order to Establish Digital Assets Regulatory Framework (2025-01-24T12:00:00Z)
10. Reuters — Federal Reserve Examines Pros and Cons of a Central Bank Digital Currency (2022-01-20T12:00:00Z)
11. Observer Research Foundation — China’s Digital Yuan: Shifting Global Currency Power (2025-12-14T12:00:00Z)
12. Congress.gov — Text - H.R.3712 - 118th Congress (2023-2024): Digital Dollar Pilot Prevention Act (2023-09-15T12:00:00Z)
13. Cato Institute — CBDC: Inclusion of the 'Unbanked' or Illusion? (2025-12-14T12:00:00Z)
14. Pidgin — Fact Check: FedNow Service Versus a Central Bank Digital Currency (2025-12-14T12:00:00Z)
15. The White House — Fact Sheet: The President's Working Group on Digital Asset Markets Releases Recommendations (2025-07-30T12:00:00Z)

Note: This article is updated as new verified information becomes available.