The global economic crisis caused by the coronavirus panic is so severe that the most powerful central bank in the world, the Federal Reserve of the United States, announced „Infinite Quantitative Expansion“. The Bank of America Securities estimates that the Federal Reserve could spend up to $8 trillion.
While the US has promised to support stocks with endless asset purchases, it is estimated that the US unemployment rate could still reach 30% for the first time since the Great Depression. The state of the dollar’s reserves remains questionable, especially as politicians are expanding the money supply.
The hegemony of a sovereign currency is proving to be a single point of failure for the global monetary system, which is an urgent issue that needs to be addressed.
How should we solve this problem?
If a country’s sovereign currency is no longer the yardstick for world trade and the global economy, the risk that the country’s monetary mechanism will influence the global economic system will be greatly reduced, thereby improving crisis management. Therefore, a multinational or super sovereign currency could serve as the basis for a new global monetary system of Immediate Edge / Bitcoin Evolution / Bitcoin Trader / Bitcoin Profit / Bitcoin Code / Bitcoin Revolution / Bitcoin Billionaire / Bitcoin Era / Bitcoin Circuit / The News Spy to solve existing problems.
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Such a currency could overcome the risk associated with a sovereign currency and allow global liquidity to be regulated. The failure of the global monetary system is due to imbalances between different economies. A super sovereign currency could help to eliminate the root cause of this imbalance, which was the hegemony of one sovereign currency over the others.
There have been attempts in the past to create a super-sovereign currency. John Maynard Keynes proposed the idea of a supranational currency, the „bancor“, in the 1940s. The International Monetary Fund issued so-called special drawing rights in the wake of the global financial crisis of 2008. However, given the current global political and economic landscape, it would be difficult for individual countries to reach a consensus on a supranational global currency.
The next supranational currency could be digital
In the crypto industry, proponents stress the advantages of the decentralized and transparent nature of crypto-currencies and believe that the same logic can be applied to the global monetary system. Digital currency like Bitcoin (BTC) could potentially be a super sovereign currency. In 2010, Bitcoin pioneer Hal Finney predicted that Bitcoin would become a reserve currency for banks. Bitcoin’s fixed offer prevents a central bank from increasing the supply of a fiat currency, which could lead to inflation. However, the fiat currency is quite volatile, which undermines its potential as a superstate currency.
Interestingly, it seems that more countries are also participating in this competition. Recently, China’s state-owned banks have begun internal testing of the People’s Bank of China’s digital currency, Digital Currency Electronic Payment (DCEP). The currency is a 100% state-secured reserve fund and a digitalised version of Chinese yuan banknotes and coins. The PBoC will initially channel DCEP to banks and other financial institutions, which will then distribute the digital currency to the public.
The DCEP is intended to replace the country’s current foreign exchange reserves and thus facilitate the Chinese government’s monetary policy process. The circulation of this digital currency will be much more efficient throughout the country and the world than any other currency.