For the past several decades, the U.S. dollar has enjoyed the status of the world’s reserve currency. While not an official title in the strictest sense, the greenback’s dominance has all but cemented it as the global standard-setter of value. Yet in recent times, there has been more and more talk of other currencies taking the dollar’s role in this capacity. And, according to many, the next global reserve currency could come not from central banks, but rather the crypto market.
This isn’t a belief that is propagated solely by those in the crypto sphere. Rather, several key U.S. officials have minced little words when it came to crypto’s ability to overtake the global reserve system. The latest among them has been Congressman Brad Sherman, who spoke about what he views as a clear threat to the U.S. dollar’s status. Although his comments came during a Congressional hearing about Facebook’s Libra, Sherman instead focused on cryptocurrencies like Bitcoin, going as far as to say is that their ultimate purpose is to become the world’s primary means of value.
In an interview with CNBC from May 2018, St. Louis Fed President James Bullard also acknowledged that there is a growing interest in displacing the greenback as the global reserve currency, while also leaving open the possibility that Bitcoin could be its successor.
Others, like CoinField CEO Bob Ras, think that Ripple is a more viable alternative and that a shift is already taking place. Ras told NewsLOGICAL that XRP is ideally positioned for this role, as it was always envisioned as a bank-integrated global payments system. With the development of the XRP Ledger, Ras thinks Ripple’s team is ushering in a new financial ecosystem, one that is built on cryptocurrencies rather than fiat.
Critics of XRP as the global reserve currency point to its liability due to being issued by a single private company and not a sovereign government. On the other hand, volatility is cited as the primary setback preventing Bitcoin from assuming this role.
Yet the latter argument ignores a very conspicuous issue: the Bitcoin market is approaching a turning point, where all of the available Bitcoin will have been mined. This point is of particular importance, as Bitcoin was created as a fixed-supply cryptocurrency to prevent monetary crises that come as a result of free-floating fiat. The parallels between a fully-mined Bitcoin market and a U.S. dollar tethered to the gold standard are in plain sight, although BTC would offer far more than just stability in this role.
Even if Bitcoin doesn’t assume the reserve currency position, there is still plenty to be said of the shadow it could cast over the U.S. dollar, as some analysts are predicting Bitcoin shooting up to over $100,000 over the next few years. Between that and the various nations around the world that are looking to issue a sovereign digital currency, it will be interesting to see how fiat holds up as the monetary system adapts to new technological innovations.