US President Donald Trump issued an executive order Thursday banning the creation of a central bank digital currency (CBDC), a move supported by Congressional Republicans.

Trump said the order would protect Americans from the "risks" of CBDCs, which he argued "threaten the stability of the financial system, individual privacy, and the sovereignty of the United States." It prohibits "the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States."

CBDCs, or "digital dollars," could be issued by the Federal Reserve and be interchangeable with physical dollars, giving the central bank control over the virtual currency's supply and value.

Former President Joe Biden had directed the Fed to explore creating a CBDC, which supporters argue could help bring unbanked Americans into the financial system and combat criminal activity.

However, many Republicans oppose CBDCs, citing concerns over privacy and the potential to undermine the banking system by reducing incentives for private banking.

While the Fed has researched CBDCs, it has repeatedly stated it has no plans to issue one.

"People don't need to worry about a central bank digital currency," Fed Chair Jerome Powell told the Senate Banking Committee last year. "Nothing like that is remotely close to happening anytime soon."