Since its inception (and even before
), bitcoin advocates have argued that it is precisely one of these sovereignty-shifting technologies: it undermines the monetary monopoly of nation states. Until recently, however, this argument has had few adherents in conventional policy-land. It was striking this week, therefore, that Mark Carney, the Governor of the Bank of England, gave a speech
in which he talked about a future world where the dollar’s place as the global reserve currency is taken by a decentralised digital asset.
Carney’s argument is that the dollar’s dominance leaves the global economy vulnerable
to damaging “spillovers” from the US domestic economy. For example, half of global trade is denominated in dollars, but the US accounts for just 10% of imports. Just as at the time of Bretton Woods
in the aftermath of Second World War, the world’s international financial institutions no longer reflect economic fundamentals.
Carney suggests that the answer may be a “synthetic hegemonic currency”. He doesn’t mention bitcoin by name, though he does refer to Facebook’s Libra (see previous coverage
) - and some of the regulatory challenges* it has encountered right out of the gates. For bitcoin true believers, though, a major crack has appeared in the fiat currency dam. In Tuur Demeester’s words
, “Technology has the potential to destroy the dollar’s network effect. I have never heard a central bank figure say this”. Interesting times.