Sometimes it’s good to remind ourselves how far crypto has come. Central bankers are now being forced to publicly defend the dollar as the global reserve currency against the rise of cryptocurrency.
Last month, Bank of England Governor Mark Carney argued the case for a Libra-esque cryptocurrency to replace the dollar as the world’s reserve currency.
His words triggered former Federal Reserve official Simon Potter, who was forced to defend the dollar’s role on the global economic arena:
“I see no argument that makes sense to have something that complicated out there when you have large, liquid capital markets in the US… Not having one currency that you can basically price things and have a deep market in, that makes life much harder for the global economy.”
The Bank of England chief has always been open to cryptocurrencies. He was among the first central bankers to defend the technology, saying they don’t pose a threat to global financial systems and he welcomed Facebook’s Libra effort.
But he went a step further at the central bank summit at Jackson Hole last month. He made the case for the dollar to be replaced by a stable crypto backed by a basket of fiat.
“[A digital currency] could dampen the domineering influence of the US dollar on global trade… By reducing the influence of the US on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies.”
As JP Morgan’s private bank wrote in a recent note to investors, the dollar’s dominance will eventually come to an end.
“There is nothing to suggest that the dollar dominance should remain in perpetuity. In fact, the dominant international currency has changed many times throughout history going back thousands of years as the world’s economic center has shifted.”
Carney believes that dollar-hoarding by governments has led to a decade of ultra-low interest rates and low inflation. Now is the time for a new crypto experiment.