Bitcoin Enthusiasts Know Fiat’s Not Forever, Think Crypto Assets are a Legit Alternative to the Monetary System
One of the hopes many cryptocurrency enthusiasts hold is the idea crypto could one day serve as a legitimate alternate or even a replacement to the fiat monetary system.
One big criticism of fiat currency has to do with exchange rates and the idea of valuing money based off of comparisons with other currencies.
While the idea of a global financial standard has been explored, today’s iterations are not the most practical. Discussing this idea, Daniel Popa, CEO of Anchor, wrote in CCN about the Special Drawing Right (SDR), of what he calls the “the closest thing we have to a financial standard.”
Created by the IMF in 1969, the SDR is based on the U.S. Dollar, Japanese Yen, British Point, the Euro, and the Chinese Yuan.
Since the SDR is exclusive to the IMF’s members, it can’t be utilized by businesses or individuals. Additionally, the SDR can actually be leveraged by the IMF for specific member interests. Popa explained how:
“the original idea for cryptocurrency was based in the hope that peer-to-peer payments would replace fiat as the dominant means of exchange and store of value.”
He mused since “we cannot count on fiat currencies to retain their value,” cryptocurrency might be the way to go if volatility subsided. He explained how
“a true crypto-based stablecoin solution may just be the answer to ensuring when markets dip or crash, life savings will be protected.”
While stablecoins like Tether have been mired in controversy, many are interested in cryptocurrency, with all its faults, simply because of a pessimistic outlook towards the global economy.
The worldwide financial ecosystem has long-relied on the U.S. Dollar, but Popa noted a few cracks in its status as a global leader. He explained how rising national debt has led many economists worrying about a potential loss of trust in repaying loans by the U.S.
Many think a big loss of confidence in the dollar could send worldwide economies into a tailspin. As the months pass, a small but growing amount of nations have expressed interest in moving away from the dollar.
De-dollarization endeavors have been seen in nations like China, Russia, Iran, India, and Turkey. According to the IMF’s Q4 2018 Currency Composition of Official Foreign Exchange Reserves, the dollar’s share dropped from 61.9% to 61.7%. The Euro, Yen, and Yuan boosted their slices of allocated reserves.
In late March, Binance CEO Changpeng Zhao asserted “crypto will increase more than 1000x (against fiat) simply due to the printing alone” (of the U.S. Dollar).
CZ was contributing to a conversation about a resurfaced video from August 2011, where former Federal Reserve Chairman Alan Greenspan said “the United States can pay any debt it has because we can always print money to do that.”