Trump is not merely rewarding the crypto industry but also targeting Fed’s independence. An executive order has banned the central bank’s digital currency, which is the only logical way cryptos can enter global reserves. Fiat coins pegged to some underlying value are the correct evolutionary direction, not coins traded on dodgy exchanges. These would be the last things central bankers would like to hold as reserves. The future of finance is decentralised, but under orderly conditions overseen by authorities tasked with ensuring financial stability.
Trump’s attempt to weaken the institutional autonomy of central banks could be more disruptive than his attack on free trade. The global response to regulating cryptos will not unravel, unlike bilateral responses to threats of reciprocal US import tariffs. Carve-outs for developing economies in a free-trade regime were negotiated multilaterally, and can be revoked individually without ripping the fabric apart. The rest of the world has little by way of a response to the US wanting to be the global crypto capital. Monetary policy works to greater synchronisation that sets the direction for capital flows. Individual action – even efforts to reduce independence of a central bank – is felt all over the integrated global financial market.
