"Stability" was always the watchword – and objective – of post-WWII politics. The United Nations, the Bretton Woods accords, the IMF, G7, and other august institutions were meant to ensure smooth trade, stable currencies, and a better standard of living for everyone. But the world today is anything but stable – and investors, savers, and governments globally are seeking alternatives to the current international economic system, which relies on the U.S. dollar at its center.
New Block's Influence Has Growing Credibility
The dollar, now trading at a two-week low, of course, has been down before, and it has bounced back each time. Currently, the US currency is valued against foreign currencies pretty close to the level it was valued when free dollar trading began in 1971.
The difference between now and then is the growth of economies in the developing world, especially in China and India. The economies of the BRICS group, which until now has included Brazil, Russia, India, China, and South Africa, already in 2023 accounted for 32% of the world's GDP - compared to 30% for the G7 countries. The bloc will yield even more influence in 2024, with the addition of Saudi Arabia, the UAE, Iran, Egypt, and Ethiopia.
With this growth, the governments behind the BRICS currencies could likely have more power in setting the rules for international trade – rules that, until now, have been largely dictated by the United States, thanks to the dollar's status as the world's dominant currency. It is increasingly likely that, soon, BRICS governments, along with others, will increasingly seek dollar alternatives.
Renewed And Variety Of Voices Calling For De-Dollarization
Now gaining power, the idea of replacing the dollar with an alternative currency that would enable them to settle payments, at least among each other, has been something that BRICS countries have sought for several years. There was wide speculation that they would actually introduce such a vehicle at their August meeting in South Africa. That did not happen, but that doesn't mean that they are any less interested in doing so.
The BRICS countries also are not the only ones dissatisfied with the current dollar-dominated system. Critics have pointed out the connection between Fed manipulation of interest rates, rising inflation, ever-mounting debt and the wide and growing inequities between rich and poor around the globe. The current dollar-based system is broken, these critics believe, and an alternative system is needed.
Can Crypto Emerge As A Dollar Alternative?
Replacing the almighty dollar would indeed be an important feature of any new international monetary system – and it is becoming more realistic that cryptocurrency could play an important role here. The rise of Bitcoin and other cryptocurrencies in recent months is a clear indication that investors and others are seeking alternatives to the current system. While crypto's role under the current international system is more or less restricted to an investment asset, akin to gold and silver, crypto – and its blockchain basis – has the potential to turn into an international currency that could become a viable alternative to the dollar in the international economy.
Bitcoin, the largest and best-known of many available cryptocurrencies, also has a mature platform designed to settle debts and purchases. Cryptocurrencies, with a worldwide capitalization of over a trillion dollars, are already being used for payments in many places, and Bitcoin is currently legal tender in at least two countries.
How Crypto Could Change The World Economy
The fact that Bitcoin is not a national currency also makes it suitable for replacing the dollar in the current political climate. History has shown that national currencies have failed to replace the dollar, for BRICs and others. Even the Euro, which was conceived in part as a dollar alternative, failed to replace it as the world's default currency. If the Euro couldn't make it, it's far less likely that the Yuan or Rupee will be able to unseat the dollar.
If anything is going to unseat the dollar as the world's default currency, it's going to have to get members of the world's strongest economy on board – and Bitcoin is currently the only non-dollar currency that has a chance of doing that. Americans are familiar with it, and a fair number of Americans even own a coin, or a portion of one. Bitcoin is also very popular in some of the world's largest economies – including the UK, Turkey, and India, which in 2023 ranked second behind the US for raw cryptocurrency transaction volume.
If India, for example, were to adopt Bitcoin for international transactions, American firms that import goods from India could convert their dollars into Bitcoin for payments. That in itself would have a major impact on Bitcoin's popularity; the US is India's largest trading partner, while that country ranks eighth for imports into the US. Using Bitcoin for even a fraction of those transactions would go a long way to turning it into an internationally accepted default currency. And it would help place the power of the purse back in the hands of the people – reducing significantly the influences of central banks and governments, and helping provide a more free, more fair, and more transparent international economy.
Cryptocurrencies Are Here To Stay
With that, cryptocurrencies have long way to go before they are widely accepted for payments or debt settlements. But with backing from major world economies like the BRICS countries, crypto could become far more popular, with people from all over the world. As interest grows in a default currency to replace the dollar, crypto might be the most efficient and fastest way to achieve that goal.
But, even if that process takes more time than anticipated, the growing international use of cryptocurrencies – with residents of countries around the world opting for Bitcoin and other cryptocurrencies for investment, savings, and business transactions - means that they are here to stay. And their use will only grow. Sooner or later, a major world economy is going to acknowledge that growth, and like developing nations Argentina and El Salvador, declare Bitcoin or other cryptocurrencies legal tender – and when that happens, the era of an international, transparent currency to replace the dollar-based economy will truly begin.
(Dmitry Gooshchin is the COO and Co-founder of Endotech.io)
