Stablecoins have the potential to temper the systemic threats posed by the United States dollar's domination of global foreign currency reserves, according to an opinion piece published by the World Economic Forum.
The Fusion Foundation is a non-profit organization focused on developing blockchain infrastructure for decentralized global finance; Lapa Capital is a tech-focused investment firm headquartered in New York.IMF: USD accounts for 62% of all central bank foreign reserves.
Liu and Lyons advocate the wide-ranging potential of stablecoins to underpin a more "Sustainable, inclusive, and resilient global system" across trade and investment, banking and payments.
Until today, the authors note, the U.S. dollar continues to account for 62% of all foreign reserves held by central banks, as IMF data for Q1 2019 has demonstrated.
Dollar hegemony perpetuates the systemic threats forcibly evinced in the 2008 financial crisis, when global investors flocked to dollar-denominated safe-haven assets, generating a precipitous global liquidity crunch.
Even overlooking such acute, systemic risks, the authors note that the lock-up of USD reserves in U.S. government bonds worldwide is exacerbating a skewed global economy, keeping U.S. interest rates low and driving the U.S. government's debt and GDP "To levels not seen since the Second World War.".
"A global scarcity of USD creates major headwinds for US exporters, widening the trade deficit and pressuring economic growth."
As the authors note, the Bank of England's governor Mark Carney has argued that a diversified digital currency - one that would be only partially weighted in USD, alongside the euro, the British pound and the yen - could reduce over-reliance on the dollar globally and function as a new international reserve currency.
Failing this, a single stablecoin - whether privately- or central bank-issued - itself risks becoming systemically dominant and simply replicating the dollar's fiat hegemony with a digital analogue, they note.
Yesterday, European Central Bank board member Benoit Coeure warned that global stablecoins remain untested and could threaten the "Autonomy and resilience of European payments systems."
Stablecoins Can Temper US Dollar Hegemony Risks, Says Non-Profit Exec
gepubliceerd op Nov 27, 2019
by Cointele | gepubliceerd op Coinage
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