Why Trump's Administration Sees Crypto as a Geopolitical Battle Against China

The Trump administration’s approach to crypto regulation is fundamentally rooted in one strategic concern: preventing China from gaining dominant control of the global cryptocurrency market. This geopolitical dimension, rather than consumer protection alone, is driving the US government’s major crypto policy initiatives. Speaking at the World Economic Forum in Davos in early 2025, President Trump emphasized that if China secures control of crypto markets, the US would face nearly impossible odds in reclaiming that position. This calculus underpins both existing and pending legislation shaping the American crypto landscape.

The Crypto Policy Response: GENIUS and CLARITY Acts Explained

The Trump administration has pursued a two-pronged legislative strategy to address this competitive threat. In July 2024, Trump signed the GENIUS Act into law, which established initial guardrails and consumer protections specifically for payment stablecoins—cryptocurrencies pegged to stable assets like the US dollar to minimize price volatility. Though the administration publicly justified the legislation as politically popular consumer protection, Trump revealed that countering China’s expanding influence in the crypto market was the more pressing motivation.

The GENIUS Act sailed through Congress with bipartisan support in 2024, reflecting rare alignment on this national security concern. The law now requires implementation of its full regulatory framework within 120 days of agency approval or 18 months from enactment—a timeline suggesting major effects won’t materialize until mid-2025 or beyond.

Beyond the GENIUS Act, the administration is advancing additional crypto market structure legislation called the CLARITY Act. Trump stated his intention to sign this bill imminently, though the legislation has faced unexpected delays. The CLARITY Act represents a comprehensive attempt to define regulatory boundaries for the broader crypto ecosystem, going well beyond just stablecoin safeguards. Congress was actively working to advance the bill as of early 2025, though its path forward remains uncertain.

Stablecoins vs Digital Yuan: The Global Regulatory Race

The US-China competition in crypto cannot be separated from the parallel race around digital currencies. China’s central bank took a significant step in January 2025 by authorizing commercial banks to pay interest on digital yuan deposits. This move grants China’s central bank digital currency a competitive advantage in attracting users, effectively making their digital offering more attractive than dollar-backed alternatives.

Meanwhile, the regulatory landscape in the United States remains fragmented on a crucial detail: whether stablecoin issuers should be permitted to offer yield rewards to users. Traditional banking groups have consistently opposed such yields, fearing they would disadvantage incumbent financial institutions. This disagreement has become one of the most contentious fault lines in crypto regulation, with the financial industry pushing for restrictive language in pending legislation.

The comparison is stark. China’s digital yuan now offers interest-bearing features that make it more compelling for users, while American stablecoins face potential restrictions that could hamper their competitive positioning. Industry observers note that if the US restricts stablecoin yields while China’s digital yuan offers returns, the regulatory gap could push adoption toward the Chinese alternative—precisely the outcome Trump’s administration seeks to avoid.

Industry Resistance and the Road Ahead for Crypto Legislation

The CLARITY Act’s path to enactment has encountered significant headwinds from within the crypto industry itself. In early 2025, the bill’s markup was delayed following vocal opposition from Coinbase CEO Brian Armstrong, who stated he could not support the legislation as drafted. Armstrong and other crypto industry leaders, attending the Davos forum as part of WEF participation, expressed concerns that the bill’s current structure would disadvantage American crypto players against international competitors.

A core concern centers on the ambiguity surrounding whether stablecoin platforms can offer rewards to users. The crypto industry and traditional banking groups remain fundamentally opposed on this question, creating a regulatory logjam. Many US banking groups continue advocating for language that would categorically ban third-party platforms and issuers from providing stablecoin yields—a stance that effectively locks American crypto innovation into a defensive posture.

As of early 2025, the US Senate Banking Committee had not yet scheduled markup proceedings for the CLARITY Act. Some lawmakers and industry participants suggested it could take weeks before the bill returns for committee consideration, indicating prolonged uncertainty.

The Larger Strategic Picture

The crypto regulatory debate now operates within a clear geopolitical frame. Trump’s framing—that securing American crypto market leadership is essential to preventing Chinese dominance—has shifted the political calculus around digital asset regulation. Rather than viewing crypto purely as a financial innovation requiring consumer safeguards, the administration presents crypto market control as a strategic national asset comparable to artificial intelligence or advanced manufacturing.

Yet this strategic imperative collides with genuine industry concerns about regulatory competitiveness. If the CLARITY Act ultimately restricts American crypto platforms while China’s digital yuan moves forward unencumbered, the outcome could be precisely opposite to the administration’s intentions. The coming months will reveal whether the administration can navigate this tension and deliver crypto legislation that satisfies both security imperatives and competitive positioning. For now, the American crypto industry watches and waits.