SEC Chairman Jay Clayton image via CoinDesk archives
The Securities and Exchange Commission (SEC) will continue its evaluation of cryptocurrency-based securities for U.S. retail investors.
The SEC‘s Office of Compliance Inspections and Examinations (OCIE) published its list of 2020 examination priorities, highlighting digital assets and service providers as areas of concern. While OCIE has listed these items in previous annual priority lists, Tuesday’s publication provided a glimpse at how the office’s approach to crypto has evolved since 2018.
Whereas previous priority lists only briefly mentioned initial coin offerings and the risks digital assets might pose to retail investors, this year OCIE wants to address investment suitability, trading practices, fund safety, pricing and the effectiveness of compliance programs. The document also mentions staffers of crypto exchanges and funds and the “supervision” of their “outside business activities.”
“The digital assets market has grown rapidly and presents various risks, including for retail investors who may not adequately understand the differences between these assets and more traditional products,” OCIE wrote.
OCIE will also examine transfer agents – entities which act as intermediaries in securities transactions – that are “developing blockchain technology” or are providing services to digital asset issuers, the document said.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Enterprise software vendor R3 has won a patent for a blockchain-based record system designed to make corporate information-sharing more efficient.
Awarded Tuesday by the U.S. Patent and Trademark Office, the patent describes a “system and method for managing transactions in dynamic digital documents” that would provide companies with a shared distributed ledger to supply relevant parties with the same immutable data record.
The award comes just over a week after R3 received another patent, that one for a new decentralized payments system that doesn’t have to use a blockchain. Awarded Dec. 31, R3 claims its protocol could facilitate more complex payments that require parties to confirm identities or meet certain legal requirements.
It isn’t clear whether the new record sharing system would be an independent protocol, or integrated with R3’s existing Corda blockchain. In December, the company completed a trial, the largest of its kind, that tested Corda’s trade finance applications together with more than 70 companies from all around the world.
Typically, companies keep their own records of agreements and positions struck with other entities. While this duplication provides them with a secure store of data, R3 claims in its patent filing that the current system can create slight disparities that cause miscommunications, unfulfilled promises and legal disputes.
R3’s patented system, which is built on a private blockchain, could replicate “every transaction to ensure all parties with access to the ledger, but not necessarily involved in any one transaction, have current and immutable information”. According to the patent, which was originally filed in August 2016, that could address some of the inefficiencies and operational risks associated with legacy record systems.
The patent also details how the new system could be used to share a ratified agreement, made accessible to both signatories, that can automatically update records with amendments or include new records for appropriate parties. It can be used to record relevant workflow without a third party who is trusted to ensure all parties receive the exact same information at the right time, R3 says.
The filing lists R3 technologists Richard Gendal Brown, Mike Hearn and James Carlyle as the system’s inventors.Disclosure Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Bitcoin’s recent price jump after the U.S. killing of a top Iranian general has rekindled a long-running debate among investors: whether it will work as a safe-haven asset like gold in times of heightened geopolitical and economic turmoil.
The cryptocurrency changed hands around $7,500 on Monday, up about 10 percent since Iran’s top general, Qassem Soleimani, was killed in a lethal drone strike authorized by U.S. President Donald Trump. U.S. stocks fell on the news as investors worried the conflict between the two nations might escalate into a prolonged and damaging war.
For some market analysts and investors, bitcoin’s rally served to underscore the digital asset’s perceived value as a hedge against inflation, historically an economic consequence of major wars. Oil prices jumped in the aftermath of the killing, given Iran’s status as one of the world’s major producers, potentially a harbinger of higher gasoline costs at the pump for U.S. consumers.
“Acts of violence and war can create inflation and have demonstrated that in the past,” said Greg Cipolaro, co-founder of Digital Asset Research, which analyzes crypto markets. So heightened violence now could portend higher demand for bitcoin, he said, adding a major caveat: “To the extent that bitcoin is a hedge against inflation.”
In traditional investing, a safe haven asset is one where the price typically rises when traders are fearful of increasing risk, or in the face of convulsing stock markets; money is pulled from riskier assets and shifted into “safer” like gold or U.S. Treasuries, expected to be a more reliable store of value.
One theory among bitcoin investors is that while the cryptocurrency lacks gold’s luster or long track record as a store of value, it shares the key property of being difficult to mine; the supply of new bitcoin is strictly regulated by its 11-year-old original programming code.
What’s more, some bitcoin advocates note the private data addresses, or “keys,” needed to spend the cryptocurrency would theoretically be far more portable than gold bars in a tumultuous, war-torn or even simply hyperinflation-racked world.
But even among fully committed crypto traders, it remains an open debate as to whether bitcoin actually trades like a safe-haven asset.
Mati Greenspan, founder of Quantum Economics, which specializes in cryptocurrencies and foreign exchange, emailed clients a chart from the data provider CoinMetrics showing the correlation between bitcoin and gold – accepted by most investors as a traditional hedge against inflation – had recently swung from negative to positive.
But in a follow-up exchange with CoinDesk, Greenspan said the correlation looks “weak.”
“It’s not a very strong correlation at all,” according to Greenspan. Based on data compiled by CoinMetrics, the correlation coefficient over a one-year time period between gold and bitcoin is now a mere 0.15, up from -0.04 back in May 2018.
One-year correlation between bitcoin and gold Source: CoinMetrics
In the case of Iran, there’s speculation locals might try to shift money into bitcoin to shield their wealth from inflation. That might occur as the country becomes more economically isolated from global finance.
Even Iran’s leaders are contemplating using cryptocurrency as a way to offset pressure from sanctions. In late December, President Hassan Rouhani said in a speech in Malaysia that Muslims need their own cryptocurrency to “save themselves from the domination of the U.S. dollar and the American financial regime.”
Michael Novogratz, CEO of the investment firm Galaxy Digital and one of the most closely watched investors in the crypto space, tweeted Sunday that the “the more I analyze this Iranian situation,” the more bullish the case becomes for gold and bitcoin.
“Mideast less stable,” Novogratz tweeted. “Equals more volatility.”
In an email to clients on Friday, Ryan Selkis of the data provider Messari acknowledged some of the most hyperinflationary periods of modern history occurred around the end of major violent conflicts like World Wars I and II and the Cold War.
However, Selkis argues bitcoin is a “risk asset” and would be among the first things investors liquidate “in the event of an uptick in global economic and regulatory uncertainty.”
“That cyclical pain could be exacerbated by further crackdowns on the industry,” Selkis wrote.
Not all cryptocurrency observers are convinced tensions with Iran have anything to do with the recent rally. Adam Vettese, U.K. market analyst for trading platform eToro, noted Monday in an email that while some market observers say the recent rally “affirms bitcoin’s status as a safe haven,” the price reaction might have simply been “a technical move off support at $7,000.”
That means the price was essentially just bouncing off a perceived price floor of $7,000, as determined by traders scrutinizing price charts for patterns, using a subjective practice known as technical analysis.
“There’s no way” the term safe haven applies “in the same sense as gold,” according to Vettese. “Cryptoassets in general are considered high risk and therefore such a description is a contradiction in itself.”
The safest bet is this debate in the bitcoin market won’t be settled anytime soon.
Bitcoin’s hash rate reached record highs this week amid rising prices and anticipation of the miner reward halving later this year.
Based on a seven-day average, the hash rate has risen sharply from approximately 93 exahashes per second (EH/s) on Dec. 30 to more than 106 EH/s on Jan. 5. The best day overall was Jan. 1 when the hashing power exceeded 119 EH/s, surpassing the previous record of 114 EH/s set back in October.
Bitcoin hash rate (seven-day average)
Bitcoin’s hash rate has increased considerably over 2019, rising from a weekly average of 40 EH/s at the beginning of the year to 80 EH/s by September.
That shift corresponded with the rise in bitcoin’s price from roughly $4,000 to more than $10,000 over the same timeframe. The hash rate first crossed the 100 EH/s milestone on Sept. 26, but it wasn’t until late October that it stayed above 100 EH/s for more than a day.
A plus-100 EH/s rate has become an increasingly frequent sight, with only one day so far this year reporting under the new benchmark.
Hash rate is a measure of the processing power dedicated to a blockchain. A high hash rate means more miners are working on the bitcoin network, suggesting it is increasingly economically viable at both the current bitcoin price and difficulty level. A report published in September predicted bitcoin’s two-week average hash rate would cross 100 EH/s at the end of 2019.
Bitcoin’s difficulty level automatically adjusts to ensure block time stays broadly at around the 10-minute mark, regardless of how many miners are working on the network. It adjusts every two weeks, the last being on Jan. 1 when it increased by 6.75 percent, the largest since September.
Plummeting cryptocurrency prices in 2018 forced many miners to shut up shop, with only the largest able to remain profitable. The industry faced an existential crisis as recently as last April when a government agency in China – home to more than two-thirds of all bitcoin mining operations – called mining “undesirable.”
However, the situation looked brighter for miners last year as the bear market faded. More than half a million new application-specific integrated circuit (ASIC) rigs are estimated to have come online in Q3 2019, following a summer in which the bitcoin price more than doubled.
In recent days, bitcoin prices have taken an upturn, rising nearly 10 percent from lows near $6,850 seen on Friday. The rise may have set the cryptocurrency up for a bullish trend shift, charts suggest, further encouraging miners.
2020 is set to be a crucial year for many miners looking to increase their capacity. Bitcoin’s block reward is expected to halve to 6.25 BTC in the coming months. While Bitmain is expected to make job cuts in anticipation of a drop in revenue, according to Chinese media, other companies are significantly scaling their operations.
U.K.-listed mining firm Argo Blockchain announced Thursday it had acquired more than 3,600 new bitcoin ASICs, more than quadrupling its total mining capacity. The news caused the company’s share price to rise by 6 percent on the London Stock Exchange.
Despite the ongoing hype surrounding the growth and popularity of decentralized finance (DeFi) applications last year, gaming and gambling remain the most popular use cases for blockchain apps.
According to blockchain analytics site Dapp.com, there are approximately four times as many users for both gaming and gambling decentralized applications (dapps) than DeFi across seven different smart contract platforms as of Dec. 31.
The growth of DeFi applications was primarily concentrated this year on the ethereum blockchain.
According to Dapp.com, over 75 percent of DeFi applications are active on ethereum, while the second most popular smart contract platform for DeFi is EOS, with 11 percent of active DeFi apps.
Looking just at ethereum, the growth of DeFi over the year is more apparent. At several points throughout the year, DeFi apps beat out gaming and gambling apps in terms of number of users.
Beyond these three dapp categories, the number of users in the entire dapp ecosystem across 10 different smart contract platforms, including ethereum, has declined.
Data from blockchain analytics site DappRadar shows that the number of dapp users has shrunk 62 percent from a high of 110,000 in May to 41,000 at the beginning of December. Even the number of active dapps across these 10 blockchain platforms has decreased from 529 to 370.
In spite of the growth in popularity and discussion surrounding DeFi this year, the data suggests the dapp ecosystem is still struggling to gain traction.
According to DappRadar communications director Jon Jordan, the little activity that was generated this year by dapps was concentrated in a handful of projects.
“18 percent of the active dapps on ethereum accounted for 99 percent of [total dapp ecosystem] value. … A very small number of dapps accounts for the vast majority of dapp value on ethereum. In that context, the number of dapps running on a blockchain is irrelevant,” Jordan said in an email to CoinDesk.
Strong optimism
Taking a step back, it would seem the year’s downward trend follows a longer decline in new dapp adoption seen since late 2018, according to blockchain analytics site State of the Dapps.
Even so, many in the crypto industry still believe in the potential for blockchain technology to serve as the infrastructure for a new internet.
Muneeb Ali, CEO of blockchain startup Blockstack, is confident that the “Web 3” use case for blockchain will one day attract hundreds of millions of new users.
“We started focusing last year on getting real applications on our platform. The next challenge? Getting, say, a million users on these applications. No one has that yet in crypto,” Ali said in an interview with CoinDesk in November.
It’s an optimistic and ambitious goal shared by the CEO of Input Output Hong Kong (IOHK), Charles Hoskinson, who is also building a general-purpose blockchain platform called Cardano specifically for new DeFi applications.
According to Hoskinson, the industry simply needs more time to develop the appropriate technology for dapp development and execution.
“I look at the five to ten-year horizon,” Hoskinson said during an interview with CoinDesk in September.” No one has reached adoption or scale yet. It’s still very early days.”
Parade of military forces, along with photographs of Qasem Soleimani, Tehran, Iran, May 31, 2019. (Image via Shutterstock)
Bitcoin jumped the most in two weeks after a U.S. drone strike killed a top Iranian military commander, fueling speculation that heightened geopolitical turmoil might spur demand for the cryptocurrency in 2020.
The digital asset’s price jumped 5 percent Friday to $7,300 as of 16:07 universal coordinated time (11:07 a.m. in New York). The surge, which appeared to follow gains in oil and gold prices, pushed bitcoin into positive territory for the year-to-date, now up 2.2 percent.
Mati Greenspan, founder of the cryptocurrency-focused research firm Quantum Economics, noted in an email that the U.S. attack drove up prices for gold, traditionally seen as a safe-haven asset whose value is expected to hold in times of geopolitical or economic instability. Many investors speculate that bitcoin bears similarities to gold, in terms of its perceived resistance to inflation.
Higher oil prices could make investors nervous about future economic growth while also potentially pushing up consumers’ costs at the gas pump, stoking faster inflation.
Another consideration is whether the escalating tension might spur demand for bitcoin among Iranians, who have shown an appetite for cryptocurrencies in recent years as the Middle Eastern economy faced a host of sanctions ordered by U.S. President Donald Trump’s administration.
In late December, Iranian President Hassan Rouhani said in a speech in Malaysia that Muslims might need their own cryptocurrency to “save themselves from the domination of the U.S. dollar and the American financial regime.”
Iran has “long been seen as one of the hotbeds for bitcoin adoption” due to U.S. sanctions on money transfers stemming from the country, not to mention a “very unstable economy,” according to Greenspan.
But the news likely precipitated purchase orders from some investors who were already planning to buy bitcoin, Greenspan wrote.
“The Iranian market in and of itself is likely too small and slow to have caused this move single-handedly,” according to Greenspan. “More likely, one or several players have been waiting on the side for a good buying opportunity below $7,000 per coin, and it seems one has presented itself.”
Bitcoin prices surged 94 percent in 2019, making it one of the world’s best-performing assets, with roughly triple the total return charted by the Standard & Poor’s 500 Index of large U.S. stocks. Disclosure Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
The Guangdong government launched a blockchain-based financing platform Thursday that will help small companies in the region receive loans faster from commercial banks.
The government-led project is supported by Alibaba’s fintech arm Ant Financial and OneConnect, a subsidiary of one of the largest Chinese insurers, Ping An Insurance, according to a media report from Sina Finance.
The platform aims to streamline the process for commercial banks to lend funds to small businesses with more detailed and reliable profiles, including credit ratings, provided by its blockchain network.
The new platform could be the result of a government initiative launched in July to create a blockchain financing platform to connect with nearby Hong Kong and Macao to help small businesses get loans easier, according to the report.
Ant Financial announced in November plans to test its blockchain network, Ant Blockchain Open Alliance, to support startups, and OneConnect filed a $468 million initial public offering in the U.S. in the same month.
The new platform creates credit ratings for small and medium businesses based on their financial and administrative information via a blockchain network of 26 government agencies such as the State Administration for Industry and Commerce.
“Borrowing money from commercial banks for small companies has been slow and expensive,” Xiaojun He, the director of Guangdong Local Financial Regulatory Bureau, said in the report.
With the platform, small businesses will be able to use their intellectual property and export-import trading records to apply for funds from commercial banks, which is impossible under the status quo, according to the report. It can also match companies with 319 financial products depending on their financial situations.
According to the report, the platform has collected information from more than 11 million companies as well as 129 financial institutions. It has processed three transactions between local technology startups and commercial banks including the Industrial Commerce Bank of China, China Construction Bank and Ping An Bank. Disclosure Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
With 2019 vanishing in the rear view mirror, Markets Daily is back for an insightful look into Central Bank Digital Currencies (CBDCs) and the US Dollar’s ongoing reserve status.
Tune in as CoinDesk podcasts editor Adam B. Levine and senior markets reporter Brad Keoun run down recent action, track interesting longer-term trends, and highlight the best “thinking with tokens” and some of the most important crypto industry developments of the day.
No time to listen? Scroll down for the transcript with full links.
Having trouble with the embedded player? You can download the MP3 here.
In this episode:
Markets, international and industry news roundup
2020 looks set to be a big year for Central Bank Digital Currencies (CBDCs), but why? Adam gets into it, with a look at the innovation vs. optimization mindsets
Adam B. Levine:On Today’s episode, bitcoin in the new year, Bahamanian Blockchain Bucks and a look at US Dollar reserve status.
Adam: It’s January 2, 2020, and you’re listening to Markets Daily, I’m Adam B. Levine, editor of Podcasts here At Coindesk, along with our senior markets reporter, Brad Keoun, to give you a concise daily briefing on crypto markets and some of the most important news developments in the sector over the past 24 hours.
Brad: Bitcoin currently around $7100, essentially in the range where it traded through most of the holidays in what was a very calm and quiet end to the year for the largest cryptocurrency, after some pretty wild market swings over the course of the past 12 months
And just to close the books on 2019, bitcoin prices rose $3,475 on the year, recovering roughly a third of the $10,186 decline we saw during 2018, which was so brutal on the entire crypto industry that it’s often referred to as “Crypto Winter”
Bitcoin’s full-year price rise works out to a 94 percent gain on the year, or almost double, in its best year since 2017, when the cryptocurrency’s price famously jumped 13-fold to its all-time-high around $20,000
It’s important to note that as Wall Street celebrated its best full-year performance for stock investors in six years, with the S&P 500 posting a 29% price gain, bitcoin’s performance was roughly triple in size
Adam: Looking out to 2020, it’s going to be a landmark year for crypto development along with a lot of other major world events such as the U.S. presidential election and the quadrennial summer olympics in Tokyo
Perhaps the most high-profile event in the crypto space is bitcoin’s so-called halving, expected in May, when the supply of new units of the cryptocurrency will be cut in half
Some analysts have predicted that the reduction in bitcoin supply, at a time when investor demand for cryptocurrency is increasing, could drive the price to a new all-time high around $100,000
Though other analysts say they think that traders and cryptocurrency miners have already adjusted their price models to reflect anticipated reduction in new bitcoin supply, which means that the impact of the halving should already be theoretically be baked into the market
Brad: Nic Carter of Castle Island Ventures wrote last week in a post on The Block that he thinks that the crypto industry is really just about halfway through a deleveraging from the bubble levels we saw in 2017
He thinks we’ll see further rationalization in the industry in 2020, with some token projects failing to achieve anything resembling critical mass, and dying off, especially in the face of continued regulatory scrutiny
And in yet another setback for a South Korean crypto exchange following last year’s alleged $49 million hack of the Upbit exchange, Bithumb has reportedly had about $70 million worth of taxes on cryptocurrency gains withheld, the first time the country’s tax agency has taken such a step
Bithumb reportedly plans to take legal action against the claim, leaving it unclear what the consequences might be for customers or the exchange itself
A tax professor at the University of Seoul told CoinDesk that the exchange might have to make the tax payment and then go back and try to collect the amount from foreign clients, though from a practical standpoint, that might prove impossible
The Bahamas’ digital currency pilot project went live late last month.Residents of the island can now enroll in the Central Bank of The Bahamas’ “Project Sand Dollar,” which began Dec. 27.
They’ll receive mobile wallets the Bahamian government sees as facilitating the future of payments on the island chain. Bankers said “Sand Dollar” is a “digital fiat currency” – not a cryptocurrency, stablecoin or competitor to the Bahamian dollar. Instead, it is simply a digital version “equivalent in every respect to the paper currency,” they said in the project outline.
But it is also a step toward the Bahamas’ long-term goal of launching a fully-fledged central bank digital currency (CBDC), Also called the sand dollar. That larger project would link domestic residents and businesses across a seamless digital payment infrastructure.
The Central Bank consensus is that decentralization is not a desirable property in a CBDC as it could aid tax avoidance and enable criminal payment systems.
Therefore, while they recognize digital money may be an improvement over physical money, a central bank designed digital currency will not resemble a decentralized cryptocurrency.
Planned CBDCs are not bitcoin-but-issued-by-the-government. They are more like credit-cards-but-issued-by-the-government, where your transactions can be tracked, examined and linked to your taxpayer-identity.
There’s always been two, largely incompatible, ways to appreciate the revolutionary possibilities of cryptocurrency, blockchains and tokens as a way to track ownership as a whole. Call it the difference between innovation and optimization. Innovators like cryptocurrency because its radical trust model eliminates the power which traditional systems imbue in central banks or other forms of monetary policy. They see the current system as fatally flawed by short term human bias, among other things, and decentralized cryptocurrency with its currency issuance publicly known a hundred years in advance, presents what looks like unstoppable competition in a space where competition is simply not allowed, yet is so desperately needed.
The move towards Central Bank Digital Currencies (CBDCs) is the optimization perspective – These people broadly think that current central bank operated money systems are great, but could certainly benefit from improvements… And that’s what they see this technology as, optimizing or improving the rough edges on a system which is already great, and which they have no desire to fundamentally change.
Returning to Danny for more details on the Bahamian program:
In this vision, residents can pay retailers through wallet-linked QR codes, with banks moving funds in digital form. The Central Bank believes this could ultimately cut currency printing costs and transaction fees while enhancing financial inclusion.
“A widely adopted CBDC would place users at less risk of violent crimes that target holders of cash, and potentially reduce security and insurance costs associated with keeping cash on business premises,” according to the outline.
For now, however, the sand dollar faces far more restrictive limits from the government. Businesses cannot hold more than B$1 million in their digital wallets, nor can they transact more than one-eighth of their annual business through the wallets in any given month. And individuals max out at B$500, with higher limits coming through “enhanced due diligence” on their accounts.
Brad: The U.S. dollar has been the primary currency for payments in international trade for almost a century, since the world wars of the first half of the 1900s, when the British empire’s influence faded and its currency, pound sterling, saw its use as a global tender decline
Of course the dollar also occupies a key spot in discussion of cryptocurrencies, since the original and oldest digital asset, bitcoin, was originally proposed as a private-market alternative to government-issued currencies like the dollar in peer-to-peer payments
But based on the way that crypto markets have evolved, the dollar is impossible to avoid, since bitcoin is priced in dollars, similar to the way major commodities like oil and gold are quoted in dollars
there’s a growing roster of so-called stablecoins like tether, USD Coin and dai, whose value is pegged to the dollar
And in some ways, even China’s planned digital version of its renminbi might trade a lot like a dollar-linked cryptocurrency, since Chinese authorities typically synch the renminbi’s daily fixed exchange rate with wherever the dollar happens to be trading
Now the big question is how long the dollar can hold on as the global reserve currency
It’s an important question because there are big benefits to the U.S. from having its own currency as such a pillar of global capital markets, but also there’s a self-perpetuating cycle at work here that creates imbalances and the risks of rapid and messy change
U.S. consumers benefit disproportionately from the dollar’s strength, since foreigners are essentially subsidizing Americans’ habit of importing more than they export
And global demand for dollar-denominated assets helps keep interest rates low on things like Treasury bonds despite a U.S. federal budget deficit of more than $1 trillion a year
That dynamic encourages governments, businesses and households to take on ever-growing amounts of debt, which might be difficult to pay back if borrowing costs suddenly jumped
History shows that these epochal shifts do eventually come, but change can be quite slow in coming
And a new report this week from CoinDesk showed that, as China’s global ambitions and rapidly advancing digital-asset technologies pose new threats to the dollar, the U.S. currency looks as strong as ever in global capital markets
As of Dec. 30, an index of the U.S. dollar’s value is up 24 percent over the past decade
That happened even as the Federal Reserve pumped more than $2 trillion of freshly printed money into the financial system and U.S. national debt more than doubled to about $23 trillion – both developments that economists have warned could faster inflation and a reduction in the dollar’s purchasing power
And the greenback’s share of central bank foreign exchange reserves stands at about 62 percent, essentially unchanged since Jan. 1, 2010, according to the International Monetary Fund
The second-place euro, touted by some leading economists in the late 2000s as a potential rival to the dollar, saw its share of central bank reserves decline over the past decade to about 20 percent from 26 percent
The Japanese yen, seen as a threat to the dollar in the 1980s, now accounts for just 5.4 percent of central bank reserves
The British pound, which as we said earlier dominated global trade in the 1800s, has a modest share of 4.4 percent, with its future uncertain as the U.K. moves toward an exit from the European Union
And China, despite decades of rapid economic growth and a push by authorities there to expand the renminbi’s use in international trade and payments, has never seen its currency account for more than 2 percent of central banks’ reserves.
As for digital assets, frequently touted as the future of money, they barely register as an asset class compared with government-issued currencies
Bitcoin’s entire market value stands at about $133 billion, well below central banks’ de minimis $218 billion allocation to the renminbi
The point here is that as the new decade of the 2020s dawn, and we see an array of what appear to be very serious challenges to the dollar’s dominance on the horizon, the dollar is going to be tough to dethrone
And if the dollar were to lose its dominant status, it would entail a pretty landmark and potentially tumultuous shift not just in global capital markets but also in the geopolitical landscape
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