Washington. The US dollar has been the world’s official reserve currency for several decades, yet many in the political sphere believe the rise of Bitcoin could end its global supremacy.
During a recent Congress hearing regarding Facebook’s digital currency project Libra, US Congressman Brad Sherman warned Bitcoin and other cryptocurrencies have the potential to threaten the US dollar’s dominance over the global financial system.
“Cryptocurrency either doesn’t work, in which case investors lose a lot of money, or it does achieve its objectives perhaps and displaces the US dollar or interferes with the US dollar being virtually the sole reserve currency in the world,” he said. Sherman claimed the US dollar’s dominance over other currencies brings multiple benefits for Americans, such as profits generated by the Federal Reserve for the US Treasury and the ability to influence other countries’ policies and actions through the use of economic sanctions.
“We stand to lose all that because cryptocurrency is the currency of the crypto-patriot,” Sherman argued.
This isn’t the first time politicians have expressed concerns about the impact of Bitcoin on the US dollar. In a May 2018 interview with CNBC, St Louis Fed President James Bullard said while Bitcoin is not a threat at this point, “we don’t know how the future’s going to unfold”.
He added: “The dollar has been the winner historically because it’s backed by the largest economy and a relatively stable policy in terms of low inflation, and that’s going to be tough to beat. But a lot of people here want to beat it.”
Meanwhile, a Congressional report released at the end of 2013 warned that if greater use of Bitcoin and other cryptocurrencies leads to multiple monetary units, the stability offered by a single, incumbent currency (the US dollar) could be threatened, particularly if new currencies continue to exhibit high volatility.
The authors said that if Bitcoins are substituted for dollars on a systematic, long-term basis, it would decrease the need to hold dollars and increase the supply of fiat money. This could reduce the demand for dollars, which would affect the rate of circulation. (Yahoo Finance)