Vladislav Ginko, an author of this OP-ED story, is a former vice-rector of Moscow-based Jewish University. He worked as a Corporate Finance lecturer at New York-based Touro University. Currently, he is an analyst and lecturer at Russia’s leading state think-tank, Presidential Academy.
The digital dollar should be based on Bitcoin since the cure cannot be worse (by far) than the problem. As U.S. President Donald Trump proclaims on coronavirus crisis, “the cure cannot be worse (by far) than the problem!”. The current situation with COVID-19 urges Trump to do two things at one moment; save lives and save the economy.
The same goes for other countries as well. As Russia’s President Vladimir Putin admits, “we’ve faced two challenges: the oil and other energy resources market has actually collapsed, and this virus [coronavirus] has rushed in.” The oil drop weighs on Wall Street as well as preventing the S&P 500 rebound.
Interestingly, when comparing the assets’ YTD performance, Bitcoin drastically outpaces both the S&P 500 and oil. This logic came down on the minds of political bigwigs at Capitol Hill and there’re a number draft laws with the mention of digital dollars has appeared.
However, all these drafts were put aside and from the Democrats’ voluminous proposal to save U.S. economy the Digital Dollar chapter has vanished despite it’s been inserted into an earlier version of this document. Digital dollar stuck in cross-hairs of political debate. The Democrats feel that Trump started being more inclined to the concept of cryptocurrencies. Why?
The necessity of the digital dollar
Digital currencies will be able to fix a number of problems with the necessity to swiftly distribute financial means to every American. What to do if a person is unbanked (they are comprising 6.7% of the U.S. population)? The CEO of Twitter and Square Jack Dorsey hints:
People need help immediately. The technology exists to get money to most people today (even to those without bank accounts). Square and many of our peers can get it done. US government: let us help.
But banked people will face delay in getting urgent financial assistance, they can wait for several weeks until the money arrives in their bank accounts. The unbanked people can get money via checks but it can take up to four months and the providers of such services may charge a fee. The prepaid cards look like an outdated solution since not all are reloadable.
All these considerations lead to the necessity of the digital dollar.
At some rate Trump follows the way of China. Beijing has banned Bitcoin trading to free a room for Digital Currency/Electronic Payment (DC/EP). The U.S. District Court has banned the circulation of Gram tokens of London’s based Telegram.
The development of DC/EP has been lagged due to the spread of coronavirus in China. At any rate in this situation the U.S. has got an upper hand in world digital competition. But the digital dollar will be a failed attempt if it’s going to be based on the old-school U.S. dollar.
It will only enhance U.S. F.R.S. with a digital bazooka and the financial system of the US might drown into the nightmare when the regulator starts emitting digital dollars without the end.
The limitless digital dollars will lead to the hyperinflation risk as ordinary U.S. dollars printing prompts the same problem. The best decision could be to create digital dollars based on Bitcoin’s technology and its emission principles, whose number has a mathematically fixed limit.