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The US views digitised money as a systemic fragility, while Europe sees efficiency and control—raising a key question: Are CBDCs boosting resilience or centralising risk?
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At a time when central banks worldwide are actively pursuing the development of digital currencies, the United States (US) has opted for a markedly different approach—outright prohibition. In January 2025, President Trump issued an executive order prohibiting the establishment, issuance, or circulation of a Central Bank Digital Currency (CBDC), citing concerns related to privacy, financial stability, and national sovereignty. This decision does not merely reflect regulatory hesitancy but constitutes a definitive repudiation of the foundational concept of a digital dollar.
Contrast this with Europe, where the European Central Bank (ECB) is pushing ahead. ECB President Christine Lagarde has made clear that the digital euro is no longer theoretical—it is on track for launch, with preparations set for October this year. The divergence in approach is stark: where the US sees overreach and systemic fragility, Europe sees efficiency, control, and a response to the inevitable digitisation of money.
In January 2025, President Trump issued an executive order prohibiting the establishment, issuance, or circulation of a Central Bank Digital Currency (CBDC), citing concerns related to privacy, financial stability, and national sovereignty.
These competing narratives underpin the broader question: Are CBDCs a step toward financial resilience or an experiment in centralised fragility? As different jurisdictions take different paths, the global debate becomes more instructive but, paradoxically, even more ambiguous. The examination of the risks and benefits associated with CBDCs appears to exacerbate uncertainty, underscoring the inherent reality that no monetary innovation is without trade-offs.
The recent executive order banning the establishment and promotion of a CBDC in the US follows a prolonged period of legislative resistance. The Anti-CBDC Surveillance State Act, initially introduced in 2022, has been reintroduced multiple times, reflecting persistent concerns among policymakers regarding the implications of a state-backed digital currency. While institutions such as the Federal Reserve have conducted exploratory research on the feasibility of a CBDC, the executive order now explicitly prohibits any federal agency from pursuing its development unless expressly authorised by Congress.
This prohibition is not merely a technical or economic decision but also a significant political statement. The concept of a CBDC remains contentious, with opponents arguing that it could serve as an instrument for financial surveillance, granting the government extensive oversight over individual transactions and potentially enabling direct control over personal financial activities. Conversely, proponents contend that digital currencies could enhance financial inclusion and improve payment efficiency in an increasingly digitised financial landscape.
The concept of a CBDC remains contentious, with opponents arguing that it could serve as an instrument for financial surveillance, granting the government extensive oversight over individual transactions and potentially enabling direct control over personal financial activities.
At its core, the decision perhaps reflects a deeply ingrained scepticism within the US policy framework regarding centralised financial control. The principal concern is that a CBDC, by design, would consolidate substantial power within the federal government, enabling an unprecedented level of oversight and intervention in economic transactions. Such a system could facilitate the real-time monitoring of financial activities, the freezing of accounts, and the implementation of monetary policies with a degree of specificity currently unattainable. The executive order, therefore, functions as a preemptive measure against the potential risks associated with state-controlled digital currency, positioning CBDCs not merely as a financial innovation but as a fundamental challenge to individual financial autonomy and decentralised economic systems.
The ECB has set its sights on launching the digital euro, with Lagarde announcing plans for its introduction by October this year. As central banks worldwide experiment with digital currencies, the Eurozone—one of the world's largest economic blocs—finds itself at the centre of a monetary evolution.
At present, the project is still in its preparatory phase, with no digital euros in circulation. However, the ECB has already allocated over a billion euros in private contracts to develop the necessary infrastructure. The next milestone, expected by October 2025, involves finalising outreach efforts, procurement standards, and selecting technology providers. While the ECB insists this will be a “digital form of cash” that complements physical currency rather than replaces it, the underlying ambition is clear: to provide a state-backed alternative to Bitcoin, cryptocurrencies, and stablecoins, which have proven resilient despite regulatory scepticism.
The ECB has already allocated over a billion euros in private contracts to develop the necessary infrastructure.
Lagarde has framed the initiative as a necessary step to “prepare our currency for the future,” positioning the digital euro as a frictionless, private, and cost-free payment mechanism. However, its actual adoption hinges on more than just technological readiness. Unlike decentralised cryptocurrencies, CBDCs remain under the control of central authorities, which raises the question: Will individuals and businesses willingly adopt a digital euro when market-driven alternatives already exist?
Despite the ECB's accelerated timeline, the digital euro’s fate is not entirely in its own hands. The European Commission and European Parliament must establish a legal framework before the ECB can move beyond preparation. In short, the current phase is not a guarantee of launch but rather a demonstration of intent. Until that framework is secured, the digital euro remains a work in progress—an ambitious monetary experiment that could either reinforce the ECB’s role in the digital age or highlight the limits of top-down financial engineering.
Two of the world's largest economies are taking radically different approaches to digital currencies, and the long-term consequences remain uncertain. The US has outright rejected a CBDC, citing concerns over privacy and state overreach. The very concept is contentious, with critics arguing that a CBDC would function as a tool for financial surveillance, giving governments unprecedented control over individual transactions. The risk is straightforward: if money becomes programmable, it can also be restricted, frozen, or manipulated at will. The rejection of a digital dollar is less about technology and more about preserving financial autonomy.
Europe, on the other hand, is pushing forward with its own digital euro, framing it as a complement to physical cash rather than a replacement. However, the motives run deeper. The digital euro is less about convenience and more about control—ensuring that monetary authority stays within the hands of central planners rather than being dictated by emergent market forces.
The rejection of a digital dollar is less about technology and more about preserving financial autonomy.
Some researchers suggest the existence of a CBDC trilemma, wherein central banks must navigate three inherently conflicting objectives. Financial stability necessitates mechanisms to prevent bank runs and mitigate systemic risks. Efficiency requires the optimal allocation of capital between short-term depositors and long-term investments. Price stability demands effective inflation control to minimise economic volatility. The challenge lies in the trade-offs—prioritising one objective often comes at the expense of the others. By attempting to address existing vulnerabilities, CBDCs may inadvertently introduce new structural fragilities, raising concerns about their long-term economic and financial viability.
The United States' decision to reject the implementation of a CBDC underscores a fundamental philosophical divergence in monetary policy—whether the issuance and control of money should be centrally dictated by the state or should emerge organically through market-driven mechanisms. By opting against a digital dollar, the US has reaffirmed its commitment to a decentralised financial system, one that prioritises private-sector innovation over state intervention.
However, this approach is not without its challenges. While stablecoins represent a potential market-based alternative, their long-term regulatory status remains ambiguous, raising concerns about their viability as a substitute for a state-backed digital currency. Furthermore, as other major economies advance their CBDC initiatives, the US may ultimately be compelled to reassess its position, either due to shifting economic imperatives or competitive pressures in the evolving global financial landscape.
By opting against a digital dollar, the US has reaffirmed its commitment to a decentralised financial system, one that prioritises private-sector innovation over state intervention.
One approach to evaluating the resilience of a monetary system is to assess not only its initial adoption but also its capacity to sustain itself without continuous external intervention. A financial framework that relies excessively on regulatory oversight, artificial incentives, or mandated adoption to ensure stability may exhibit inherent structural weaknesses. It is essential to continuously assess the economic implications of digital currencies, as well as the consequences of their absence, particularly about the evolving perception of money itself. The experiences of both the US and Europe offer valuable insights, not only for their own financial systems but also for other nations actively exploring or implementing CBDCs. A comprehensive evaluation of these developments can provide a deeper understanding of the broader implications for monetary policy, financial stability, and the future of sovereign currency systems.
Sauradeep Bag is an Associate Fellow at the Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Sauradeep is an Associate Fellow at the Centre for Security, Strategy, and Technology at the Observer Research Foundation. His experience spans the startup ecosystem, impact ...
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