According to Kenneth Rogoff, who served as former IMF chief economist and a professor at Harvard, the rise of cryptocurrencies endangers the U.S. dollar’s leading role in the global market. Rogoff said in an interview on Bloomberg that the power of the dollar is decreasing, with the renminbi emerging and the euro continuing to expand both trends that have lasted for roughly ten years.
The Effect of the Underground Economy
According to Rogoff, people are using crypto to hide money and avoid economic sanctions. Filthy dollar notes were the main means for $20-25 trillion worth of trade in underground economies before Russia’s invasion. Now, many public authorities prefer paying with cryptocurrencies for these tasks.
What makes crypto interesting
According to Rogoff, people who say cryptocurrencies are worthless scams are mistaken. He believes crypto functions as a recognized way to exchange value. He explained in “Our Dollar, Your Problem” that cryptocurrencies are currently taking a bite out of the dollar’s global position.
Economic Consequences
If crypto grows in value and the dollar weakens, it will raise interest rates worldwide and make everything more expensive. Because the dollar is the main reserve currency, treasury bills, mortgages, car loans and student loans are all affected by the status of the U.S.
Government Limitations
Even though crypto is not used in official transactions that governments can influence. Rogoff points out government oversight is more difficult in the underground economy. The toughness of following crypto transactions in illegal markets is why cryptocurrency is not worthless, as “there’s a lot being put at risk.”
Dollar’s Weakening Position
Rogoff points out that crypto’s role in legitimate markets is limited. Yet its increasing use in secret economies threatens the dollar and the benefits America enjoys in world finance.
