The Currency Cold War: Four Scenarios

Publicado en by Coindesk | Publicado en

The only thing we know for certain about the future of global currencies: There's a ton of uncertainty, and many scenarios are in play.

As fintech guru David Birch has framed it, the global powers are engaged in a "Currency Cold War," with China and the United States vying for supremacy.

There are an infinite amount of currency scenarios, but for everyone's sanity, we'll consider just four, loosely inspired by the cheeky "Red vs. Blue" framework Birch lays out in his book The Currency Cold War, with "Red" being a state-sponsored digital currency like China, and "Blue" being a cryptocurrency like Facebook's Libra.

Scenario 2: China's digital currency gains dominance - the Red Scenario.

The U.S. dollar wanes, but no one dominant currency emerges in its place.

The dominant currencies on the planet? "The currencies of the communities where I live," says Birch.

The nation's global yuan payment network already has nearly 1,000 financial institutions, according to the Nikkei Asian Review's Koji Okuda, and is making inroads in Africa, "Due to China's economic clout in the region, especially with its Belt and Road infrastructure-building initiative." And as Ledger Insights reports, "Africa's payments using China's currency increased by 123% over three years" during June 2019.That said, even as China continues to aggressively make inroads with both currency strength and the DCEP, most of the futurists agreed that it's unlikely that China would gain true hegemony in the next decade, even if the nation continues to gain influence.

"It's not just the power of the transaction. It's the value behind that currency. A world in which the Chinese currency eclipses the US currency is a world in which Chinese values eclipse US values." A world of Chinese currency hegemony, she explains, would be the result of other dramatic shifts in power.

"How do you keep the U.S. relevant from a currency perspective?" King asks, musing a bit.

What would the internet look like if a private currency emerged as dominant? "If you could pay anybody anywhere in the world, instantly and for free, we wouldn't be so dependent on the advertising model of internet content," says Birch.

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