Can The United States Afford A Crypto Loss?
The crypto race is a global competition, and the US is currently in a vulnerable position. The decentralized nature of cryptocurrencies has created a new challenge for the United States, which has relied on petrodollar hegemony to maintain its national security for generations. While crypto has proven its techniques and platforms to be vital to the internet-driven economy, other nations are now pulling away from the US dollar, leading to de-dollarization, which has implications for the US crypto race.
For decades, the US has been in a position of preeminence in the global economy, and its national security has depended on the standardized use of the dollar for international trade in petroleum and other commodities. This unrelenting massive global demand for US dollars became a generational subsidy that allowed the central bank to print more of them to monetize US debts, public and private. However, the easy years of American monetary dominance over the world via the petrodollar are nearing their end.
De-dollarization is accelerating the cracks in the petrodollar, and the US can no longer enforce dollar reserve trade as the international standard. The signs of this are already visible in China and Brazil’s announcement of the end of the use of dollars in their bilateral trade relations, ASEAN nation finance ministers meeting in Indonesia to reduce dollar dependency, and France closing a deal to buy 65,000 tons of Russian natural gas from China denominated in yuan.
This de-dollarization has implications for the US in the crypto race. The US can outcompete foreign powers and actors in enticing everyone to use currencies it dominates by investing heavily in them and allowing the market to continue making them so feature-rich, beneficial, and easy to adopt that they’re as irresistible to international merchants as Apple and Google smartphone operating systems are to US consumers.
To accumulate a scarce digital commodity that will be one of the most consequential reserve currencies in history for international trade, settlement, and remittances, the US needs to marshal BTC hash power at the State Department, DHS, Treasury, DOD, DOJ, Commerce Department, and/or Federal Reserve. This will enable the US to begin competing in the crypto race and catch up to other nations that have already started investing heavily in cryptocurrencies.
Moreover, BRICS countries make up a massive trade bloc, and the current intra-BRICS trade stands at $307 billion, set to reach $500 billion by 2015. Within BRICS, China is the dominant country, exporting $135 billion in goods and services annually to its partners. As trade increases, China could move swiftly to provide renminbi for importers of Chinese goods. At this time, China facilitates payment in renminbi through a central bank liquidity swap. Since 2009, 16 countries have exchanged local currencies for a total of 1.6 trillion renminbi. More countries, including Japan and Great Britain, are in line to participate, but after the Delhi meeting, China’s BRICS partners may leapfrog and be next on the list.
The US can no longer rely solely on its petrodollar hegemony to maintain its national security. The crypto race will be as important as the space race, and the US cannot afford to lose it. However, the US can catch up to other nations by marshaling BTC hash power and investing heavily in cryptocurrencies. By doing so, it can outcompete foreign powers and actors and become a leader in the crypto race. Failure to do so will result in losing the crypto race, and with it, the US’s position of preeminence in the global economy.