Normalization or malaise? It’s too soon to interpret Bitcoin’s failure to set a new record since Donald Trump took office on January 20. The best-known cryptocurrency topped $109,000 for the first time a few hours before the inauguration ceremony, but it has since retreated. On Thursday, January 30, it was trading at just over $105,000 (€101,180).
The new occupant of the White House, who promised during the presidential campaign to make the US the “world capital” of cryptocurrency, was quick to take action, signing an executive order on January 23, titled “strengthening American leadership in digital financial technology.”
The text aims to facilitate citizens’ and private companies’ access to blockchains, the technology that serves as the backbone of crypto, while “promoting and protecting the sovereignty of the United States dollar.” There is no question, however, of the US creating a central bank digital currency (CBDC), a cryptocurrency to be issued by the Federal Reserve (Fed). CBDCs are being studied by most of the world’s major central banks, but the Trump administration believes they could compromise “the stability of the financial system, individual privacy and the sovereignty of the United States.”
Indirectly ‘digitizing’ the dollar
The American president’s team is therefore betting on the development of another form of digital asset: stablecoins, sometimes presented as “second-generation” cryptocurrencies, which are supposed to be more stable than bitcoin or ether, as they are backed by a pool of assets, often made up of bonds.
One of the most widely traded stablecoins, the USDC, which is issued by a private company, Circle, but is already billing itself as the “world’s digital dollar,” is backed by a monetary fund made up of Treasury bonds. The formula is proving popular: Today, it represents almost $52 billion.
“Circle was well placed to become the regulated stablecoin,” explained Nathalie Janson, associate professor of economics in the finance department at NEOMA Business School. “The Trump team probably concluded that a digital currency would be unnecessarily complicated, whereas stablecoin already exists and is successful, so it had every interest in placing it under their authority.”
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