For many years, the US dollar has been recognized as the world’s reserve currency. It has been at the epicenter of global financial infra acting as the haven currency in times of turmoil. However, that position may soon disappear according to Ripple CEO, Brad Garlinghouse’s remarks on August 4 via Twitter.
The COVID-19 pandemic has exposed the weak points of global economies and even the biggest have not been spared. The US Federal Reserve is issuing stimulus packages worth trillions of dollars. Experts and analysts are now concerned that if this trend continues the dollar will continue weakening considerably.
Garlinghouse said that the US dollar’s position will not disappear in favor of the yuan, gold, cryptocurrency, or any other asset any time soon. But, the US currency is weaker currently.
Barely a year ago, many people accused crypto of being a scam. But now, things have changed with many governments looking seriously at blockchain and its potentials. Blockchain can address challenges that were assumed quite hard to solve before including transparency and settlement.
The cryptocurrency market is up 80% year-to-date while the USD is down 3%. The Ripple CEO said that it comes down to trust in the financial system eventually.
Global populations are losing confidence in fiat currencies due to increasing inflation and uncertainties. With that in mind, they will choose to diversify. Thus, the future global financial system will also do some diversification.
Many governments, led by China, are looking into the possible development of central bank digital currencies (CBDCs) to mitigate any devaluation risks of their fiat currencies.
The XRP factor
Some users believe that XRP will become a major digital bridge asset of the world to connect the crypto and fiat currency worlds. Others say that, by XRP acting as a bridge, it will expand the reach of the dollar. Hence, with time it will make the USD stronger, particularly while competing against a digital yuan.
In the end, the world will gravitate towards better trade settlement methods and the USD might be marginalized. Garlinghouse is convinced that blockchain is the fuel that will power that gravitation.
Featured image: Brad Garlinghouse’s Remarks At Ripple’s Q1 2020 Virtual All-Hands Meeting