A lot of people, including mainstream media outlets, still think that Bitcoin is all about reinventing the way we use money around the world. Even though the underlying blockchain technology has the potential to disrupt the monetary ecosystem as we know it, there is no need to reinvent money right now. However, the financial ecosystem needs a technology upgrade, which is where blockchain technology can truly excel.
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Reinventing Money: Creating a New Global Currency
Saying there is no need to reinvent money is not the same as saying there is no one interested in reinventing money. Bitcoin is not here to revamp the concept of money as we know it, even though it is a borderless form of transferring value all over the world. Most people are well aware how banks and other financial institutions hate Bitcoin but are warming up to blockchain technology.
Financial experts all over the world are not too keen on Bitcoin either, even though these are the people who want to create a new monetary standard. This process sounds a lot easier than it truly is, as there are a lot of different factors to take into consideration. A new global financial order is not an easy feat, but there are signs the monetary system will be changing very soon.
The thriving force to create this new global currency is none other than China and the People’s Bank of China. At this time, all of the major currencies and economies are anchored to the US Dollar, which is no longer sustainable if China has a say in it. Furthermore, the country is calling for a major debt restructuring, based on this new global currency.
Willem Middelkoop, who was one of the speakers during the recent Reinvent. Money event in Rotterdam, stated how China is looking to avoid entrapment in US Dollars. As much as people want to see China as a financial powerhouse, a large portion of their holdings and investments are denominated in USD, which could backfire on them in the long run.
In a surprising turn of events, the idea of this new global currency would see the reintroduction of the gold standard. Nearly 100 years ago, the US Dollar was decoupled from its gold value, which was a necessary change at that time. But as our economy has progressed in a crawling manner, China sees an opportunity to restore the gold standard by tying it to a new global currency.
This decision was not taken on a whim either, as the People’s Bank of China is adding between ten and twenty tonnes of gold to their reserves every single month. In the Western world, however, all financial institutions and experts are telling people to get rid of their gold assets, as prices continue to tumble. Which party will be right in the end, remains to be seen.
But that is not all, as the International Monetary Fund (IMF) has announced that it will introduce the Chinese Yuan to its “basket” of fiat currencies in 2016. Doing so could be the first step along the way towards creating this new global currency. It is nearly impossible to predict the full impact of the IMF’s decision, and 2016 will be an interesting year for the world economy.
Last but not least, China is one of the 57 countries around the world that have joined forces to create the Asian Infrastructure Investment Bank to directly compete with the IMF, if needed. As you would come to expect from the name, this “body” will focus its efforts on supporting infrastructure construction in the Asian-Pacific region. Do keep in mind this idea is only in the early stages, and nothing has been finalized just yet.
Bitcoin is not the Real Enemy to the US Dollar
Contrary to popular belief, Bitcoin and other virtual currencies pose far less of a threat to traditional fiat currencies. Particularly the US Dollar is a focal point whenever a Bitcoin discussion arises, but the real threat comes from within the traditional financial system. In fact, Bitcoin could turn out to be an ally for established fiat currencies, such as USD, EUR and GBP.
Russia, the arch nemesis of the United States for multiple decades now, has been liquidating its USD assets over the past few months. They are becoming the real threat to the US, together with China. Both Russia and China are playing nice with each other for now, as both countries prefer to construct a new economy, rather than create a conflict within the current economic model.
Keeping all of this in mind, most of the Bitcoin trading volume is still originating from both the US and China. More often than not, people denominate the Bitcoin price in US Dollar, and hardly ever in Chinese Yuan. Whether or not Bitcoin will be traded against this new global currency – should it come to fruition – will play a major role in the future of virtual currencies.
Do you see China and its allies create a new global currency and dethrone the USD? Let us know in the comments below!
Source: Reinvent.Money Conference
Images courtesy of IMF, Asian Infrastructure Investment Bank, Shutterstock
