Digital currencies have gained prominence over the last few years, although such options will not budge the U.S. dollar from its seat of prominence, according to chief economist International Monetary Fund (IMF) Gita Gopinath.
“Improvements in payment technology may have lowered the cost of switching from cash to digital payments, but there is little evidence they have done much to reduce the expense of moving among currencies,” Gopinath said in an opinion piece for the Financial Times on Jan. 6, adding:
“Widely-held perceptions of the dollar’s safety and stability have kept it dominant in the international monetary system for decades.”
Regulation and adoption of digital currencies
In June 2019, Facebook released a whitepaper for its Libra currency, a digital asset backed by a bundle of financial assets and currencies. The project has since been met with significant regulatory backlash.
Additionally, countries such as China have stepped into the ring, looking to release their own national digital currencies.
“While these are intriguing possibilities, they are improbable in the near-term,” Gopinath wrote.
Resilience of USD
In terms of rationale, Gopinath mentioned the U.S. dollar’s prominence in trade and banking across the globe, and to an ever-growing increase in USD usage — a domino effect of sorts.
The economist compared digital currencies to the Euro, which has not been able to overtake USD, noting the vast number of aspects contributing to the success and dominance of a national currency.
Gopinath also pointed toward institutions and investor safeguards held within the U.S. dollar, increasing its strength.
In short, Gopinath made it clear throughout her article that far too many complicating factors currently stand in the way of a digital currency looking to replace the U.S. dollar.
These waters may soon be tested as IBM predicts a central bank digital currency coming within five years, according to a CryptoX report.
CryptoX reached out to Gopinath but received no response as of press time. This article will be updated accordingly upon receipt of a response.
