Crypto, a double-edged opportunity for the dollar!

Wed Jan 17, 2024 ▪ 3 min reading ▪ by Fenelon L.

The US dollar's hegemonic position as the linchpin of the global financial system faces new challenges with the rise of crypto, according to a recent report from Morgan Stanley. This digital currency would have the potential to both weaken, but also strengthen the role of the greenback.

A balance between dollar and crypto

The erosion of dollar supremacy by crypto

For Morgan Stanley, cryptos are a double-edged sword for the primacy of the dollar on the international financial scene.

On the one hand, the progression of Bitcoin and stablecoins could, ultimately, undermine the dominance of the greenback. American monetary policy and the use of sanctions are already pushing certain countries to turn away from the dollar. This “dedollarization”, combined with US deficits, undermines the status of the dollar as the global reference currency, according to Andrew Peel of Morgan Stanley.

On the other hand, the meteoric rise of cryptos like Bitcoin is creating a draft. Although still embryonic, these decentralized currencies could, if the enthusiasm continues, challenge the leadership of the dollar on the international economic scene in the future.

The strengthening of the dollar thanks to stablecoins

Paradoxically, stablecoins could on the contrary cement the status of the dollar as a reference currency. These cryptos backed by the greenback reproduce its stability.

Their growing adoption by traditional financial institutions demonstrates their ability to meet the need for fiat currency in the digital age. Rather than contesting the supremacy of the dollar, they could therefore extend it in a modernized form.

However, at the same time, the growing appeal of central bank digital currencies (CBNCs) is calling into question the dominant role of the dollar in international transactions. Ultimately, MNBCs could become a cross-border payment standard, reducing dependence on the dollar and the SWIFT network.

As Andrew Peel of Morgan Stanley wrote, “the growth of cryptos and stablecoins, combined with the promise of MNBCs, have the potential to significantly transform the monetary landscape”.

Thus, if they were to become widespread successfully, stablecoins backed by the US dollar would spread the currency of the United States throughout the world. They would thus participate in the strengthening of the dollar as the dominant international currency.

Whether it is cryptos like Bitcoin or stablecoins, the international monetary landscape is at a historic turning point under the growing influence of digital currencies. Their continued rise could permanently transform the international role of the American dollar, for better or for worse.

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Fenelon L. avatarFenelon L. avatar
Fenelon L.

Passionate about Bitcoin, I like to explore the intricacies of blockchain and cryptos and I share my discoveries with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I firmly believe that Bitcoin is the tool that can make this possible.


The comments and opinions expressed in this article are those of the author alone, and should not be considered investment advice. Do your own research before making any investment decisions.

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