The US dollar has become your problem! How does Crypto Assets undermine the hegemony of the US dollar?

Renowned American economist Kenneth Rogoff recently published "Our Dollar, Your Problem," analyzing the role of the dollar in the global financial system and how Crypto Assets affect the dollar's hegemonic status. He also refuted Buffett, stating that Crypto Assets are not eyewash, but rather have substantial value.

Kenneth Rogoff: "Our Dollar, Your Problem"

Kenneth Rogoff is an American economist and currently serves as the Maurits C. Boas Professor of International Economics at Harvard University. He was the Chief Economist at the International Monetary Fund (IMF) from 2001 to 2003 and has held positions at institutions such as the Federal Reserve and Princeton University.

Rogoff recently published "Our Dollar, Your Problem," analyzing the role of the US dollar in the global financial system and how Crypto Assets are affecting the dollar's hegemony. He believes that although Crypto Assets cannot completely replace the dollar, their influence in the underground economy is rising. He warns that the dollar's dominance is no longer taken for granted! Rogoff recently gave an exclusive interview to Bloomberg, and here are excerpts from that interview.

Kenneth Rogoff: The US dollar is declining.

This book provides a comprehensive introduction to the rise of the US dollar after World War II, including how it reached such a high level and how its competitors were eliminated. The dollar not only became the leading currency but also became more dominant than other currencies.

But Rogoff believes that the US dollar is on the decline. The Renminbi is breaking free from the shackles of the dollar, and the Euro will play a larger role, a situation that has been ongoing for ten years.

Rogoff also mentioned Crypto Assets, as one of the main markets for the US dollar is the global underground economy. There, the government does not control everything.

Can Crypto Assets replace the US dollar in the underground economy?

Many people will ask: Can crypto assets replace the US dollar?

In a legitimate economy, the government has a significant influence, where encryption cannot replace the US dollar. However, in the underground economy, the government's influence is much smaller.

The so-called underground economy can include illegal activities and tax evasion. Tax evasion is quite serious around the world. The average level in developed economies is between 15-20%. The United States is one of the lowest countries, below 15%. However, in most developed economies, especially in Europe, this ratio is much higher. In developing economies, this ratio accounts for one-third of GDP.

There are still many gray areas and shadow economies, such as people paying certain expenses with cash, arms trading, human trafficking, drugs, and so on.

According to Rogoff's research, the underground global economy may account for 20% of global GDP. This is a huge market, and the US dollar dominates it.

Bitcoin has weakened the dominance of the US dollar.

Despite the fact that Crypto Assets have not made significant progress in the legitimate economy, their use in the global underground economy is becoming increasingly widespread—including criminal activities, but mainly tax evasion and regulatory avoidance—where cash, especially the dollar, has always dominated. The viewpoint that there is no "fundamental value proposition" in the transactions is incorrect. Many countries are also using Crypto Assets to evade U.S. financial sanctions.

To some extent, Crypto Assets have merely replaced nearly untraceable US dollar cash. Encryption technology provides new ways to obscure transactions previously conducted through normal financial channels, thus the impact of information loss on national security is much greater. As much of the rest of the world becomes dissatisfied with the US's excessive control over the financial system, it becomes increasingly difficult for US regulators to respond to this challenge, which is also one of the main reasons we may see the market continue to shift from the US dollar market to other trading instruments.

Rebutting Buffett, crypto assets are not eyewash, encryption has value.

Including masters like Buffett who believe Crypto Assets are an eyewash, but in the encryption chapter of this book, the author explains why this is completely wrong.

Because if the underground economy accounts for 20% of the global GDP, it would become a $20 trillion to $25 trillion economy. If you provide a means of exchange, that is a value proposition. From this perspective, Crypto Assets have value. They are used for transactions. Even if Crypto Assets are strictly regulated, it is difficult for the government to control a large part of the economy. So they are not without value.

This article poses a problem for you: how do Crypto Assets undermine the hegemony of the US dollar? Originally appeared in Chain News ABMedia.