The CEO of asset management and financial advisory firm Lazard has recently been making headlines after comments that suggested that cryptocurrency is contributing to a weakening of the US dollar as a global reserve currency. These comments come at a time when there is a series of potential threats that could potentially undermine the USD’s role as a globally accepted reserve currency. Whilst cryptocurrencies hold great allure for those disillusioned by fiat currencies and central banks, the notion that cryptocurrency could threaten the role of the US dollar, the world’s most universally accepted currency, is notable.
Lazard’s CEO, Kenneth M Jacobs, made these comments in a recent interview with Bloomberg. Jacobs acknowledged that cryptocurrency is naturally not the only factor influencing the popularity and stability of the US dollar as a global reserve currency, however, he argues that it still has a significant impact. He also pointed to the unilateral policies of the US as being a contributing factor to the possible undermining of the US currency. Jacobs ceded that a major disruption of the current state of things is probably not in the cards for the immediate future. However, he pointed to rapid advances being made in areas such cryptocurrencies as allowing the US currency to be replaced as the global reserve currency.
It is not unheard of for this sort of thing to take place. The US dollar itself superseded the British pound sterling as the global reserve currency in 1945, following the Bretton Woods agreement of 1944. One could readily imagine that the next significant disruption would be to do away with central banks altogether, something which sizable swaths of the cryptocurrency community have been advocating for years. Nonetheless, the fact that the CEO of a $250 billion asset management firm has made similar sorts of predictions certainly lends it some credence.
However, it is unclear what currency would supersede the US dollar as the world’s reserve currency if it were to eventually be displaced. Back in 2017, the head of FX strategy at Saxo Bank, John Hardy, identified three main issues that could affect the role of the US dollar as the world’s most accepted currency. These included the rise of China, and the Chinese Yuan, as well as the relations between China and the US, as well as a ”loosening of the US-Europe transatlantic alliance”. It would seem as if the Euro and Chinese Yuan are both likely contenders if the US dollar were to eventually lose its role as the world’s premier reserve currency. However, the recent rise of cryptocurrency would certainly lead speculators to at least consider the notion of Bitcoin or a similar cryptocurrency as the world’s reserve currency.
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