Mark Carney, the governor of the Central Bank of England has opined recently that a digital currency that would be Central Bank supported could have the potential and capability to dismiss and replace the US dollar as the Global hedge currency. He made these sentiments while speaking at the economic policy symposium, in Jackson Hole, Wyoming, last Friday.
Following the discussion, he also revealed that there was a necessity for a new international monetary and financial system, IMFS. He takes note that whereas the US dollar has for a while now been playing a dominant position in the world order, new developments in the recent past, such as the increased globalization, trade disputes and even the boom of the crypto industry, may have stronger ramifications on national economies in the present. This is in comparison to the impact that they would have had in the past.
Carney also moved to highlight that the dollar’s usage in international securities issuance was because of the dominance tag that the currency comes within its use. Essentially, it is this dominance that the US dollar conversion rate has, that has made it be used as the chief settlement currency for all international trades. This notwithstanding, however, Carney sees that the developments in the economy of the United States that would have an impact on the dollar exchange rate could similarly have a significant effect in terms of the ripple effect to the rest of the world that depend on the US dollar for international trade purposes.
“While the world economy is being restructured the US dollar remains as important as when Bretton-woods collapsed” Carney is quoted as to say.
The Central Bank of England governor has also advocated several currencies that he deems could replace the US dollar, and these include the Chinese Renminbi and most likely, any other cryptocurrency that would have the support of an international alliance of Central Banks.
He is s quoted as saying in part “It is an open question whether such a new synthetic hegemonic currency, SHC will be the best provided by the public sector perhaps through a network of Central Bank digital currencies.”
He also continues to say that synthetic hegemonic currency, SHC could inhibit the overbearing influence of the US dollar on the global arena.”
It is a wide known fact that technology can disrupt the entire current network of the potential factors that serve to protect the dollar and its dominance as Carney explains. The governor notes that the ever-increasing online transaction occurrences and the usage of electronic payments as compared to traditional currency or Fiat are just some disruptions that are being witnessed in recent years. Whereas the Bank of England governor was careful not to put any cryptocurrency as a reference explicitly; he did, however, take note that “the relatively high cost of domestic and cross-border electronic payments and encouraging innovation with new entrants apply new technologies to offer lower-cost more convenience in terms of retail payment services.”