Last week our theme was “Can a Cryptocurrency replace the US Dollar to Become the World’s Reserve Currency?”
Our theme for this week is “Lightning Network is the Bitcoin story that matters in 2019.“
In an article on Medium, Facebook isn’t just thinking about just creating his own crypto, it wants to replace the U.S. dollar according to Ted Livingston. The founder and CEO of the Kik messaging app, predicted Facebook’s crypto coin could eventually replace the US dollar.
After the end of WWII, the U.S. dollar has dominated the global financial system, just like the British pound before it, and the Spanish dollar before that. But, some of the major economies around the world may want a new digital currency to function as the reserve. The US dollar’s share of global central-bank reserves hit a 5-year low, according to the International Monetary Fund.
How much U.S. currency is out there? According to the Federal Reserve Board of Governors, approximately $1.70 trillion in circulation as of January 23, 2019, of which $1.66 trillion was in Federal Reserve notes. That figure could drop to as low as $501 billion within 10 years, as Bitcoin, and cryptocurrencies in general, become more widely used for transactions.
Bitcoin, Facebook Coin or another crypto could be a clear alternative to traditional government-backed currencies, at a time when governments’ abilities to manage their finances are coming into question.
Could Bitcoin replace the U.S. dollar as the global reserve currency?
Cofounder/CEO Brian Armstrong, the answer is yes. He predicted that the digital currency may very well supplant the greenback by 2030. For that to happen, Bitcoin needs to overcome several obstacles: 1) it must be an effective medium of exchange, so we can buy goods using it 2) it must function as a store of value 3) it needs to function as a unit of account.
Private companies, banks and countries around the world are racing to lead the next revolution in financial technology. Currently, there are more than 1,400 digital currencies and tokens out there, serving a variety of uses.
What would happen if a dominant market force like Amazon entered the cryptocurrency market and began accepting crypto as a payment method? Image a cryptocurrency from a company like Amazon. An Amazon cryptocurrency wouldn’t just change the face of the world’s largest online retailer. It would change the world.
Central banks from China to England and Uruguay are considering issuing their own crypto. I think state-backed cryptocurrencies are pointless, but they can serve as a stepping stone to complete decentralization. State-backed cryptocurrencies represent a break away from US dominated fiat financial hegemony.
Russia has begun a major research and development in blockchain, so that financial transactions can be processed and verified without reliance on Western-controlled banks.
One catalyst for the erosion of the US dollar hegemony is the development of SWIFT alternatives. This year has also seen a rash of crypto-based solutions proposed or utilized by Argentina, Russia, and Germany.
The International Monetary Fund, IMF, has already announced efforts to put its world money, the special drawing right, SDR, on a distributed ledger. This would make the SDR a global cryptocurrency for settling balance of payments transactions among China, Russia and other IMF members, also without reliance on the dollar payments system.
I don’t know if it will be Bitcoin, Facebook coin or some other peer-to-peer digital currency that will replace the US dollar. But it will be a cryptocurrency. The dollar’s death will be on blockchain and I believe that it will be Bitcoin.
While most people today are not ready to give up their bank accounts for Bitcoin wallets, blockchain, the technology behind Bitcoin, is nothing less than the operating system of an entirely new economy. For the first time in the history of mankind, this technology could render politicians, central banks, governments and large corporations as we know them obsolete when it comes to our money.
Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.