Shaking the Dollar's Throne
The New Money Brief covers the global rise of digital currencies and how they are disrupting the world of payments, and much else.
Delivered several times a week. Created and edited by Marc Andrew.
For many years, a macro hobbyist community has been speculating on the U.S. dollar’s imminent demise as the global reserve currency. And they’ve been consistently wrong.
However, their debates have gained new significance amid the recent China-Saudi charm offensive, war in Ukraine, and frequent commentaries on shifting geopolitical pillars and their near-term impact.
Despite these challenges, the dollar remains powerfully resilient. But its status as the world’s monetary base layer will end someday. Perhaps not soon, but someday. All things change.
What will follow?
Will it be replaced by China’s rising currency (as Dalio expects, in this image)? By a basket of regional currencies?
Or something else?
(image courtesy of Ray Dalio)
Yes, China has been the growth story of the past few decades. But there’s one economy that has surpassed even China’s and is a better story: the internet economy
The internet scaled to its modern immense power and impact because it is decentralised: its distributed network design allows data to be transmitted across multiple pathways. That prevents single points of failure, ensures accessibility, and enables the internet to easily scale and accommodate new users and technologies.
And there is now a digital currency that exhibits those some exact features: bitcoin.
Bitcoin is a decentralized digital currency, created in 2009 by an anonymous person or group known as Satoshi Nakamoto, that relies on peer-to-peer transactions without the need for a central authority, perfectly aligning with the decentralized nature of the internet. In other words, bitcoin is the native currency of the internet, and will scale with it.
It’s easy to think otherwise but we remain in the earliest growth chapters of the internet’s story. And bitcoin is emerging as fundamental to its story. It is a more likely successor as global reserve currency than the Yuan.
Many may find that absurd. But here’s David Letterman telling Bill Gates the internet is comical and absurd. Not that long ago!
USC Professor of Finance Nik Bhatia has written a terrific and historically-informed book on this topic, here. You should read it, even if you’re sceptic. And Nik’s newsletter is among the stories linked below. It is very good.
Enjoy your weekends! Marc.
The New Money Brief covers Bitcoin and the global rise of digital currencies, and how they are disrupting the world of digital commerce payments, and much else.
Delivered several times a week. Created and edited by Marc Andrew.
Argentina will start to pay for Chinese imports in yuan rather than dollars, the government announced Wednesday, a measure that aims to relieve the country's dwindling dollar reserves.
In April, it aims to pay around $1 billion of Chinese imports in yuan instead of dollars and thereafter around $790 million of monthly imports will be paid in yuan, a government statement said.
The decision aims to ease the outflow of dollars, Argentina's Economy minister Sergio Massa said during an event following a meeting with the Chinese ambassador, Zou Xiaoli, as well as with companies from various sectors.
Source: Reuters
Yuan Overtakes Dollar as China’s Most Used Cross-Border Currency
China passed another milestone in its bid to reduce reliance on the dollar, as yuan usage in its cross-border transactions jumped ahead of the greenback’s for the first time in March.
The local currency’s share of China’s cross-border payments and receipts rose to a record high 48% at the month end from nearly zero in 2010, according to research by Bloomberg Intelligence citing data from the State Administration of Foreign Exchange. The dollar’s share declined to 47% from 83% over the same period, the figures showed.
The ratio is calculated based on the volume on all types of transactions, which includes securities trading through the links between mainland China and Hong Kong’s capital markets. It doesn’t represent transactions used by the rest of the world — the yuan’s share in global payments was little changed at 2.3% in March, according to SWIFT.
Source: Bloomberg
Dollar Challengers: Euro, Yuan, Gold, and Bitcoin
Everywhere you look, it’s dedollarization. Headlines and narratives, of course.
Because on the ground and within the banking system, it seems that all anybody wants is dollars. How realistic is dedollarization, though?
Not very, especially when you look at the hard numbers. In today’s post, we’ll explore how hopes of a euro-, yuan-, or gold-centric monetary system are intangible. We’ll explain how bitcoin adoption is the only competitor with promising, albeit early, momentum…
Source: The Bitcoin Layer
Cryptocurrency’s go-ahead landscape is reaching a critical regulatory inflection point. And it may be stablecoins, the backbone of the cryptocurrency economy, that help chart a clear path forward.
This, as Republican lawmakers on the House Financial Services Committee unveiled their version of a new draft stablecoin bill Monday (April 24), following a contentious debate April 19 over an older proposal.
The GOP document makes several changes, including giving state regulators more power to charter stablecoin issuers, something which New York Department of Financial Services (NYDFS) Superintendent Adrianne A. Harris had been pushing for, as well as more generally narrows the bill’s focus, including excluding algorithmic stablecoins.
Under the original bill, stablecoin issuers, which include both banks and nonbanks, needed to register with the Federal Reserve even if they had received state approval. The latest iteration still allows for the Fed to take ultimate enforcement action against issuers if individual states fail to do so upon its recommendation.
Importantly, the Republicans’ bill includes a proposed confirmation that stablecoins are not securities and therefore should not be regulated by the Securities and Exchange Commission (SEC).
Source: PYMNTS
Three Republican members of the United States House of Representatives Financial Services Committee have sent letters to the heads of U.S. banking regulatory agencies seeking information on possible coordinated efforts taken against digital asset firms. The letters follow up on ones sent to the same addresses by the lawmakers earlier.
Dated April 25, the letters were addressed to Federal Deposit Insurance Corporation (FDIC) Chair Martin J. Gruenberg, Federal Reserve System Chair Jerome Powell and Office of the Comptroller of the Currency (OCC) Acting Comptroller Michael J. Hsu. The letters contained identical text with an individualized set of demands to see the agencies’ records.
The letters began by recalling the Obama Administration’s purported Operation Choke Point that encouraged banks to deny service to certain types of business. They continued:
“Today, we are seeing the resurgence of coordinated action by the federal prudential regulators to suppress innovation in the United States. There is no clearer example than in the digital asset ecosystem.”
Source: Cointelegraph
Bitcoin is still the future of payments, says Lightspark CEO David Marcus Crypto has a lot of haters these days. The former Facebook exec is trying to prove them wrong with his Bitcoin startup.
An interview with Alex Heath, deputy editor at The Verge and David Marcus, the CEO of Lightspark. That’s a company that just launched a service to make fast transactions using Bitcoin on something called the Lightning Network.
David was previously at PayPal, and then he led Meta’s big payments effort that went nowhere, but he’s got a lot to say about where crypto and payments are right now… listen here.
Source: The Verge
Ryan McInerney isn’t worried about FedNow, debit rivals or AI challenging the giant card network company.Visa’s CEO brushed off competitive threats, such as real-time payments systems and debit network rivals, on Tuesday as he discussed a rise in the company’s fiscal second-quarter earnings.
When asked about the risks or benefits of FedNow, the instant payment system the Federal Reserve plans to launch in July, Visa CEO Ryan McInerney spoke extensively during the call with analysts Tuesday about the potential impact. Visa operates the largest U.S. credit card network.
McInerney dismissed the idea that the new FedNow system, which will allow consumers to settle payments in real time through banks, will challenge Visa’s debit card network or Visa Direct cross-border services.
Source: Payments Dive
Visa has begun hiring for what one executive calls the company’s “ambitious crypto product roadmap.”
Cuy Sheffield, who oversees the payments giant’s cryptocurrency operations, said on Twitter Monday (April 24) that the company had just posted new openings for senior software engineers “to help us drive mainstream adoption of public blockchain networks and stablecoin payments.”
He added that Visa is particularly interested in candidates with background in Github Copilot and other AI-assisted engineering tools used to write and debug smart contracts.
Source: PYMNTS
Can a CBDC be truly private? An ACLU technology expert weighs in
‘Crypto is filled with contentious acronyms. The newest front has emerged around CBDCs, or central bank digital currencies—a kind of government-backed alternative to cryptocurrencies, such as the Bahamian Sand Dollar or the Nigerian eNaira. Digital payments are here to stay, whether offered through services like Venmo and PayPal, decentralized blockchains like Bitcoin and Ethereum, or government-backed projects like CBDCs, and the only question is which future wins out.
Most crypto services still require a fiat on-ramp, meaning users need to undergo some know-your-customer requirements to access crypto, especially as peer-to-peer options like LocalBitcoins and Paxful vanish. In that sense, most crypto platforms offer no meaningful privacy improvements to Venmo, PayPal, or Zelle. Meanwhile, the future of stablecoins, in the U.S. at least, looks murky, as lawmakers debate legislation and would still require KYC and “seize and freeze” provisions.
As Stanley told me, a well-executed CBDC should mimic the properties of physical cash, meaning it would be fully accessible and untraceable. He acknowledged the government’s interest in tracking larger transactions to prevent money laundering, but he said the KYC requirements for CBDCs should only kick in at higher thresholds, as they do with cash—an arguably outdated $10,000 limit set in the 1970s.
“When you’re talking about ordinary people and ordinary transactions, we don’t think that the tentacles of the government’s surveillance infrastructure should reach down to that level,” he said.
If that sounds like a pipe dream, you’re right…”