January 18-24, 2025
Big news. The most important event of the week is Trump’s digital decree. For simplicity, here is Pavel Ryabov’s description:
“A Powerful Blow to the Fed – Trump’s First Decree on Crypto
Trump immediately canceled all key Biden decrees restricting the circulation of crypto in the United States, and all by-laws and directives that contradict Trump’s existing decree.
The most important thing right away: the decree prohibits the creation and use of central bank digital currencies (CBDC) in the United States, prescribing a categorical ban on the creation, issue, circulation and use of CBDC within the jurisdiction of the United States.
In fact, this is a direct blow and a knife in the back of the Fed, since only the Fed can issue a CBDC.
CBDC (Central Bank Digital Currency) is a digital currency issued by a central bank. It is a digital analogue of a national currency and is used as legal tender. Unlike cryptocurrencies such as Bitcoin, CBDC is centralized and completely controlled by the state. Its value is tied to fiat currency (1 digital dollar = 1 dollar).
In 2022, the Fed published a report that looked at the potential benefits of CBDC, such as accelerating cross-border payments and expanding access to financial services, as well as the risks, including threats to financial stability and privacy.
In November 2022, the Fed launched a pilot project, the Regulated Liability Network, aimed at testing digital assets, including CBDC, in interbank settlements.
However, things did not go further. The main consensus was that existing instruments in the dollar financial system are sufficient for the circulation and storage of financial assets, accordingly, a digital dollar is not needed yet, we will study the topic further.
At its core, CBDC can give the government access to data on citizens’ financial transactions, which raises privacy concerns, although the authorities have long had full access to any transactions within the dollar financial system with a full chain of addresses and contacts.
Trump completely and categorically canceled all Fed projects in this direction, effectively usurping part of the control over financial flows.
What else is in Trump’s executive order?
▪️The order proclaims digital assets as a key element of the innovative development and economic leadership of the United States (a new priority for the United States). “Digital asset” in the order refers to any digital representation of value that is recorded in a distributed ledger, including cryptocurrencies, digital tokens, and stablecoins.
▪️Full legalization of crypto at all levels. The document guarantees citizens and companies the right to use public blockchain networks, develop software, and mine, validate, conduct transactions, and independently store digital assets without prosecution.
▪️Support for stablecoins. Promotion and protection of the sovereignty of the US dollar (according to Trump’s crypto team), including by promoting the development and growth of legal and legitimate dollar-backed stablecoins around the world.
A working group on digital asset markets is being created under the National Economic Council. It will include representatives of key agencies, including the Treasury, Justice, SEC, and CFTC. The working group will be headed by a special adviser on AI and cryptocurrencies.
You know what’s most phenomenal? The crypto council does not have the Fed in any form. The most important document regarding financial stability does not have the Fed!
Implementation deadlines:
- 30 days: identify all existing regulatory documents in the field of digital assets;
- 60 days: submit recommendations for changing or canceling regulatory standards;
- 180 days: develop a new federal system for regulating digital assets.
The working group must propose a federal regulatory framework governing the issuance and operation of digital assets, including stablecoins, in the United States. The working group’s report must consider provisions on market structure, supervision, consumer protection, and risk management.
What did Trump do? Decentralized financial flows, both US residents and non-residents, within the contours of the dollar financial system.”
In effect, Trump declared two wars. The first is the Bank for International Settlements (BIS) – an international financial organization whose functions include promoting cooperation between central banks and facilitating international financial settlements; in addition, it is a center for economic and monetary research), which was the main coordinator of the relevant work of all central banks. Russian in particular. Note that this structure is part of the London financial center.
Secondly, the US Federal Reserve. A natural assumption arises that Trump’s team (including all PayPal alumni, in particular Thiel, Musk and David Sachs, who was appointed head of the above-mentioned group) is seriously considering the issue of replacing the dollar (controlled by a private structure of the Federal Reserve) with some cryptocurrency-based structures. However, it is too early to draw conclusions in this direction.
Macroeconomics. Capacity utilisation in Germany (76.3%) is at its lowest since early 2010 (not counting the Covid slump):
Рис. 1
UK manufacturing optimism (-47%) is just 1% off a 16-year low (excluding Covid):
Рис. 2
Japan Manufacturing PMI (an industry benchmark; a reading below 50 indicates stagnation and decline) 48.8, 10-month low:
Рис. 3
Japan’s CPI (consumer inflation index) is +0.6% per month; in the last 11 years it was higher (+0.7%) only once, in October 2023:
Рис. 4
And +3.6% per year is a 2-year peak; the almost half-century peak of January 2023 is not far away:
Рис. 5
Canada’s PPI (industrial inflation index) (+4.1% per year) is at a 2-year high:
Рис. 6
Including raw material prices (+9.1% per year) – for 27 months:
Рис. 7
US 5-year inflation expectations (+3.2% per year) repeated a 17-year high:
Рис. 8
UK unemployment at highest since June 2017 (excluding Covid):
Рис. 9
Why its consumers are the most pessimistic in 14 months:
Рис. 10
US unemployment claims at 38-month high:
Рис. 11
Mexico Retail Sales -1.9% YoY, 7th straight loss:
Рис. 12
The Chinese central bank left monetary policy unchanged, as did the central bank of Norway, but its head promises to begin easing policy as early as March.
The central bank of Turkey cut the rate by 2.5% to 45.0%.
The Bank of Japan raised the rate by 0.25% to 0.50% (a 30-year high); promises further tightening.
Main conclusions: The crisis continues and the “powers that be” are starting to take it more and more seriously. As are ordinary people who are starting to look for safe havens. As a result, both gold and Bitcoin have returned to last year’s peaks (the cryptocurrency has even broken through them), despite the overall strength of the dollar on Forex.
Рис. 13
Рис. 14
Well, we have already written about Trump’s cryptocurrency decree in the first section of the Review.
We wish all Chinese a successful New Year, the year of the snake, and all our readers a good rest on the weekend and a smooth work week!