Global De-Dollarization and the Role of Bitcoin: Arthur Hayes

Will the US dollar lose its status as a global reserve currency? BitMEX co-founder Arthur Hayes does not rule out the possibility and believes it is a question worth considering for those looking to preserve their wealth.

The former CEO of the exchange published an article on Thursday exploring the economics and role of the dollar around the world, and how its diminished role could affect global adoption of cryptocurrencies.

The dominance of the US dollar and its decline

In an article entitled “liquidity exitHayes explained that the dollar’s worldwide dominance is supported by the United States’ open capital account and its dedication to free trade. Each creates additional demand for the dollar, with the former allowing Asian countries to buy US assets with US dollars, and the latter allowing Americans to buy cheap Asian products.

However, being the issuer of the world’s reserve currency also means that the US Federal Reserve and the US Treasury are responsible for keeping the global economy intact. In other words, when the global economy demands more US dollars, the US must provide it – even if that increases inflationary pressure on the domestic economy.

“The trillions of dollars of Asia’s wealth also depended on the good graces of American politicians,” Hayes wrote. “As Russia has recently discovered, the rule of law and property rights are not rigid.”

In the past few months, several global trade corridors have indicated interest in moving away from dollar trade settlement. For example, Chinese and French energy companies Agreed last month to settle the LNG deal in Chinese yuan instead of US dollars. Brazil and China have it too make a deal To trade using their national currencies, rather than the dollar.

As Hayes points out, the heavy dependence on the dollar means that countries like China must import the monetary policy of the United States, and also submit to its own political risks.

While the US has long been seen as a reliable and politically stable country, the co-founder claims this has changed in light of former President Donald Trump’s arrest earlier this month. As it happens, Trump and expect That the US dollar would lose its global dominance soon after he was released on bail.

The future of the world currency

Hayes predicted that the future would see multiple currency blocs, but no currency was as “dominant” as the US dollar today. Imbalances between blocs will be settled into a “neutral reserve currency” such as gold and cryptocurrencies, which are “not tied to any particular country.”

He continued, “As Bitcoin continues to prove to be the hardest money ever created, I expect that more and more countries will at least start to consider whether it is a suitable savings vehicle alongside gold.”

Hayes also linked the risk of weakening the dollar’s role on the world stage to the Biden administration’s campaign against cryptocurrency firms. “The West is making it more difficult to buy cryptocurrencies and store them in a private wallet,” he added.

Since the collapse of FTX, many politicians on the American political left have become more skeptical of cryptocurrencies, with Questioning Whether the asset class belongs to the country.