First they dismiss and laugh at you, then they criticise you, they fight you and you win. This is how the struggle for Indian Independence went according to Mohandas Gandhi, but the same path is kind of similar to the one that cryptocurrencies are going through right now.
The only difference is that rather than being fought against, we’re seeing an increasing number of influential names actually come to the realization that digital currencies may be the best way forward, especially where it relates to a global reserve currency.
One of the prominent names among the established order of centralized agencies now calling on financial institutions and government organs to get behind a digital currency now includes the outgoing chief of the Bank of England – Mark Carney – who actually takes the call even further, urging centralized entities to adopt and put a digital currency into use as a reserve currency replacement to the US Dollar.
That’s not to say that the US Dollar has somehow lost its pre-eminence just yet, however, as Carney harkens back to the Bretton Woods agreement of 1945.
“While the world economy is being reordered, the U.S. dollar remains as important as when Bretton Woods collapsed,” Carney admitted, while also musing over the potential alternatives out there.
It makes sense why he and other analysts and financial experts would be looking around nervously for alternatives. This is especially relevant now considering the ongoing trade war taking place between the United States and China. With the latter seeing some serious knocks to its GDP this year, while the US economy is seeing setbacks to its industrial output.
Carey, therefore, questions the plausibility of a universal digital currency that could help to take some pressure off the US Dollar.
“It is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies.”
While it makes for an interesting alternative, one of the reasons for the statements against Facebook’s Libra in July was down to the fact that there’s a very clear hegemony that the United States seeks to maintain with its currency. So it’s not likely that they’ll be providing a ringing endorsement.
Be that as it may, the prospect of a wholly digitalized currency, as a “concept is intriguing,” Carney concluded.
“It is worth considering how an SHC in the IMFS could support better global outcomes, given the scale of the challenges of the current IMFS and the risks in transition to a new hegemonic reserve currency like the Renminbi.”