Mark Carney, governor of the Bank of England, is pushing back against the US dollar and its role in the global economy. Speaking in Jackson Hole, Wyoming on Friday at a gathering of central bankers from around the world, Carney details how the rise of technology is disrupting the current financial system and suggests that the days of US dollar dominance may be numbered.
“Technology has the potential to disrupt the network externalities that prevent the incumbent global reserve currency from being displaced. Retail transactions are taking place increasingly online rather than on the high street, and through electronic payments over cash. And the relatively high costs of domestic and cross border electronic payments are encouraging innovation, with new entrants applying new technologies to offer lower cost, more convenient retail payment services.”
Not only do blockchain-based systems allow money to flow like email, across borders, instantaneously and cheaply, they’re also better-suited for smartphones, e-commerce and the mobile lifestyle of millennials who are empowering the push for a cashless global economy with on-demand settlement. In terms of speed and cost, they outperform fiat currencies based on traditional banking protocols that require multiple intermediaries.
Carney doesn’t mention any decentralized cryptocurrencies or blockchain-based payments systems such as Bitcoin, Ethereum, Ripple and XRP, which have been gaining traction and causing alarm among policymakers – from India to the United States. These alternatives are threatening the status quo because they’re able to function without governments and central banks.
He does, however, single out Facebook’s Libra as an application that has ignited a paradigm shift: using technology to create a new digital currency backed by multiple countries to reduce, if not eliminate, the overarching impact of the US dollar around the world.