Trump Administration’s Crypto Policy, Stablecoins, and India’s Stand
#Editorial
Context
The Trump Administration (2025) introduced major policy shifts on cryptocurrencies and digital assets, disrupting the ongoing global consensus on crypto regulation.
The U.S. announced new frameworks under Presidential Orders, CLARITY Act, and GENIUS Act moving away from central bank-led digital currencies (CBDCs) toward private stablecoins.
Key Policy Proposals by the Trump Administration
Policy Proposal | Description |
1. Crypto Reserve | Create a national reserve from seized crypto assets (e.g., Bitcoin) through law enforcement actions. |
2. Ban on CBDCs | Prohibit development or use of central bank digital currencies in the U.S. |
3. Promotion of Stablecoins | Encourage global issuance and adoption of US dollar-backed stablecoins. |
4. Halting Global Crypto Frameworks | Stop work on creating a global regulatory framework for cryptocurrencies. |
Legislative Actions
a) CLARITY Act
Framework for regulating crypto assets within the U.S.
Aims to reduce compliance barriers and “encourage innovation.”
b) GENIUS Act
Promotes U.S. dollar-backed stablecoins globally.
Issuers:
Subsidiaries of insured depository institutions,
Federal-qualified non-bank payment stablecoin issuers,
State-qualified payment issuers.
These issuers must comply with:
Anti-Money Laundering (AML) laws,
Regular audits,
But no central bank control over supply or liquidity.
CBDCs vs. Stablecoins
Feature | CBDC (Central Bank Digital Currency) | Stablecoin |
Issuer | Central Bank (sovereign) | Private entities |
Backing | National currency | Asset-backed (often USD or commodities) |
Legal Tender | Yes | No (private money) |
Regulation | Fully under central bank control | Partial regulation, higher risks |
Risks | Low (sovereign guarantee) | High — default, money laundering, liquidity shocks |
Use | Official payments & trade settlements | Speculative & private transfers |
Impact on Liquidity | Controlled | Can disrupt liquidity & capital flow |
→ CBDCs are sovereign, stable, and transparent, while stablecoins are risk-prone and unregulated.
Risks of Stablecoins
Default Risk – Issuer may fail to redeem tokens.
Money Laundering Risk – Used in illicit cross-border transactions.
Systemic Liquidity Risk – Oversupply can destabilize monetary policy.
Capital Control Risk – Hard for central banks to manage currency flow.
Surveillance Gap – Lack of monitoring over end-use.
Why the U.S. is Promoting Stablecoins
Strategic Dollarization: Push to increase global demand for USD-backed digital assets.
Political & Personal Motives:
Trump family-linked ventures such as World Liberty Financial operate USD1 stablecoin (≈ $2.6 billion market cap).
Reported profits of over $1 billion from crypto ventures.
Narrative: “American innovation and dominance in digital assets.”
Global Response
Many countries are concerned about the rollback of global crypto regulation efforts.
Some are considering stablecoins but fear systemic risks.
Atlantic Council’s CBDC Tracker:
Number of CBDC pilot and research projects has doubled recently.
Countries are moving toward sovereign digital currencies, not private stablecoins.
India’s Perspective
India’s payment ecosystem (UPI) is already efficient, low-cost, and inclusive.
Stablecoins unnecessary for domestic payments.
CBDC (e₹) pilot ongoing by RBI seen as a safer path for international settlements.
India aims to settle trade in local currencies with other nations (esp. BRICS and Global South).
Adoption of USD-backed stablecoins would increase dollar dependency, against India’s strategic interest.
BRICS and De-dollarization Context
BRICS and Global South countries pushing for alternative payment systems independent of the U.S. dollar.
Plans for local currency settlements and exploration of a BRICS reserve currency or CBDC linkage.
Policy Takeaways
India should continue CBDC development, especially for cross-border payments.
Avoid adopting foreign-backed stablecoins to preserve monetary sovereignty.
Support multilateral regulation of digital assets under G20 or IMF frameworks.
Monitor U.S. stablecoin expansion as a potential geopolitical tool for financial influence.
Prelims Practice MCQ
Q. Which of the following are potential risks associated with private stablecoins?
Money laundering
Default or credit risk
Systemic liquidity risk
Reduction of global dollar demand
Select the correct answer:
A. 1, 2, and 3 only
B. 2 and 4 only
C. 1, 3, and 4 only
D. 1, 2, 3, and 4
✅ Answer: A
🟩 Explanation: Stablecoins carry significant risks — including default, liquidity imbalance, and misuse for illicit transfers — but they may increase, not reduce, dollar demand.