It’s without doubt that the U.S. dollar is the most widely accepted currency on Earth. Its role as the global reserve currency was cemented after World War II, with the global financial system and trade evolving around the dollar.
The dollar is currently the go-to currency across the world. In inflation-ridden nations such as Venezuela, the U.S. dollar is sought after more than the local currency, but a deeper look at the geopolitical shifts happening across the world show major global players slowly and quietly opting out of the dollar’s financial system, with record levels of precious metals being bought by governments.
Alongside this new emerging trend, innovations such as cryptocurrencies have further undermined the economic empire that the dollar ultimately powered. This trend hasn’t gone unnoticed amongst central bankers, with Bank of England (BoE) Governor Mark Carney suggesting the dollar’s run as the reserve currency could come to an end with the rise of an international “virtual currency” stepping in.
According to Bloomberg, in a talk this week with other central bankers, Carney suggested that a global digital currency with a similar concept to Facebook’s Libra coin should replace the dollar’s role as the reserve currency and he called for banks to come together on the matter.
“In the longer term, we need to change the game, when change comes, it shouldn’t be to swap one currency hegemon for another.” – BoE Governor, Mark Carney
From the impression of the BoE governor’s talk, the vision of a global cryptocurrency could preview a long-term vision that central banks have going forward in the 21st century, a financial system where economic dominance isn’t concentrated within a central authority, but more distributed.
“Even a passing acquaintance with monetary history suggests that this centre won’t hold. Let’s end the malign neglect of the international monetary and financial system and build a system worthy of the diverse, multipolar global economy that is emerging.” – BoE Governor, Mark Carney
For such a system, central banks across the globe will need to find consensus and come to a mutual agreement, similar to G20 but for financial institutions. Based on history, whether or not it would benefit the end users of the system is debatable, and the euro provides many lessons in what not to do…
Carney’s Dream Already Came True!
With Bitcoin and other leading cryptocurrencies gaining the attention of figures from all levels, people already have what Carney is suggesting. The notable difference is that BTC, LTC, ETH, XRP, and others are all open-source, can have potential use cases built around them, and don’t need institutional reserves or backing to pump or maintain their prices.
An interesting fact for the XRP and Ripple fans is that the BoE is a “PAID customer of Ripple” according to Ripple CEO Brad Garlinghouse. It remains up for speculation how much influence Ripple has had on the BoE’s stance towards blockchain- and cryptocurrency-driven platforms and services.
Brad Garlinghouse: “The Bank of England is a Customer of Ripple, as well as another Central Bank that is unannounced.”
"We have more customers in the pipeline that we are yet to publicly announce ."
— 𝗕𝗮𝗻𝗸 𝑿𝑹𝑷 (@BankXRP) February 8, 2018
The world’s eighth oldest bank also has a surprisingly open stance towards digital assets. Taking the emerging asset class seriously and providing information on the markets for users, central banks will likely continue to scramble and innovate as money 2.0 and the system around it continues to emerge.
“Cryptoassets combine new payments systems with new currencies that are not issued by a central bank. Examples of privately issued digital currencies include Bitcoin, LiteCoin, Ether (Ethereum) and XRP.” – Bank of England
This is not investment advice; please always do thorough research and only invest what you are willing to lose, especially in times of uncertainty.