May 25, 2022
What Will Determine the Future of Money?
The international economy is beginning to fracture around the development of novel digital currencies and the human values that their systems represent. Since currencies represent a commonly accepted medium of exchange and can act as an enabler or disabler of economic relationships, they have the power to shape how the global economy functions.
The economic landscape today is evolving rapidly with the emergence of various fiat currencies, central bank digital currencies (CBDCs), and cryptocurrencies that each represent a set of goals or priorities set forth by the issuing body. For example, the US Dollar symbolizes globalization. Bitcoin represents hyper-globalization, with a focus on decentralization and a sprinkle of revolution. The Digital Yuan represents an attempt to track purchases, collect data on consumers, and disconnect a sizable portion of the global economy from the US Dollar.
As diversification occurs, we should expect to see the US Dollar challenged on the global scale.
COVID-19, further discomfort with a US-centric global economy, and the implementation of economic sanctions have ignited isolationist sentiment across the world, leading to the fracturing of interests, values, and leadership. If unchecked, this trend could create an economy that is based on a basket of currencies rather than one that hinges primarily on the performance of the US Dollar/US economy. The growing pains of crypto have not deterred the decentralized finance and creator economy from pursuing a privacy-based system that operates outside of the purview of governments, which helps explain the rise of Monero, Horizen, Railgun, Dash, ZCash, and other so called privacy coins.”
China’s continued push to implement a CBDC that logged over $8 billion in transactions in the second half of 2021 has still not been met with serious pushback from the international community. Israel’s reduction in US Dollar foreign reserve holdings also symbolizes a move away from a US-centric system. These trends denote a larger shift to a diversified world economy, where many types of currency (decentralized and state-issued) live alongside one another.
Read the full article from The Belfer Center.
More from CNAS
-
How Do You Tariff a Movie and Liza Tobin on the Trade War with China
China expert Liza Tobin, managing director at Garnaut Global and new CNAS adjunct senior fellow, joins Emily Kilcrease and Geoffrey Gertz to discuss the ins and outs of the US...
By Emily Kilcrease, Geoffrey Gertz & Liza Tobin
-
Friendshore First, Trade War Second
Edward Fishman is the author of Chokepoints: American Power in the Age of Economic Warfare. Fishman is an adjunct senior fellow at the Center for a New American Security (CNAS...
By Edward Fishman
-
Trump's First 100 Days in Trade Policy
Emily and Geoff look back on the first 100 days of Trump’s trade policy, with a focus on how different parts of the U.S. political and economic system are reacting. They get i...
By Emily Kilcrease & Geoffrey Gertz
-
What Is President Trump’s Economic Plan?
A to-and-fro between Washington and Beijing has left many world leaders confused who to side with, as many look towards the White House wondering if there is a detailed plan a...
By Emily Kilcrease