The U.S dollar isn’t about to lose its status as the world’s leading currency anytime soon because of the major rise of crypto such as bitcoin, says top foreign exchange strategist.
On the one hand, central banks around the world own about $3.1 trillion in greenback-denominated U.S. Treasury debt, so they have little reason to let the dollar lose value to a cryptocurrency, according to Marc Chandler, the chief market strategist at Bannockburn Global Forex.
What is more, the main factor that sets cryptocurrencies and the dollar apart from each other is that the U.S. is backed up by treasure bonds, an innovation that the crypto world still hasn’t come up with.
“What stands behind [the U.S. dollar] is something that the crypto space has not yet innovated and that is that central banks hold their dollars in Treasury bonds — not just in dollars but they have these Treasury bonds behind them,” said Chandler during CoinDesk’s “First Mover” show.
While he also noted that Jerome Powell, the chairman of the Federal Reserve, recently said that cryptocurrencies have the potential to replace gold, he isn’t convinced cryptocurrencies can be considered as a dollar replacement or “real money”.
“It doesn’t look like it’s really money,” said Chandler, “meaning a means of exchange, a store of value, and a unit of account.”
What could make it more official and secure according to him, is if institutions such as the IRS accept crypto as a tax payment.
“For me, the smell test of all this will be when tax officials, when the IRS says, ‘Yes, you can pay your taxes in crypto.’ Taxes seem to be the origin of money in many ways. When the IRS or some other major tax authorities say you can pay your taxes in crypto, then I’ll believe it’s money,” he added.
He finished by saying “I think also there’ll be a two-pronged system, at least the way the U.S. and Western Europe are conceiving it, where you’d have the digital currency not really disintermediating banks; they’ll strengthen banks.”