Renowned American economist Kenneth Rogoff has raised serious concerns about the growing threat that cryptocurrencies pose to the global dominance of the U.S. dollar.
In a recent interview with Bloomberg, Rogoff, a former chief economist at the International Monetary Fund and current Harvard University professor, described the dollar’s global supremacy as fraying at the edges.
Rogoff Highlights Decline of Dollar Influence
Rogoff believes that while the U.S. dollar is still the top currency, its impact is waning due to an upward trend in the euro, the Chinese renminbi and in particular, the rise of cryptocurrencies. Kenneth explained there is a growing trend away from the dollar’s dominance. He said:
“I see it [dollar’s dominance] as in decline it’s fraying at the edges where, of course, the renminbi is breaking free of the dollar, the euro is going to have a larger footprint that’s been going on for a decade.”
Rogoff Highlights Crypto’s Role in Tax Evasion
Concern centers on the underground or “shadow” economy, a large and nearly untraceable part of world commerce that, according to World Bank and Rogoff, account for about 20% of the world’s gross domestic product or $20–25 trillion. In the past, traders in these markets mainly used U.S. dollar notes for payment. Now, Kenneth believes, cryptocurrencies are moving forward at a faster pace.
In his latest book, Rogoff explains that Bitcoin and other digital assets are fast becoming favorite methods for dodging taxes and avoiding regulations. He said:
“…although crypto has not made significant inroads into the legal economy, it is increasingly used in the global underground economy consisting of criminal activity but mainly tax and regulatory evasion where cash, especially US dollars, had been king.”
Crypto Threatens Dollar’s Economic Privilege
The consequences of this development are significant. Kenneth explains that having the main reserve currency is an “exorbitant privilege” that greatly benefits the U.S. If cryptocurrency threatens the dollar’s value, higher interest rates may follow for all kinds of loans, like those for students, houses or the federal government.
In addition to economics, Kenneth stressed the importance of national security. The government depends on tracking dollar-denominated transactions to spot any dangers. Becoming more common, untraceable crypto could interfere with intelligence work and money control.
Rogoff believes that cryptocurrencies should not be criticized for lacking inherent value. Crypto has a deep value and anyone who disagrees is simply incorrect, he argued. Because it works well in uncontrolled deals, cryptocurrency has a genuine, though debated, use value.
Dollar’s Legal Market Role Remains Unshaken
According to Rogoff, digital currencies may be a risk to how the dollar functions in unregulated economies, but he feels global financial markets will always prefer the dollar over other digital assets. He said:
“Crypto can’t replace the dollar. But that’s in the legal economy where the government has a lot of leverage. But in the underground economy, by definition, it has much less leverage.”
His remarks are taking place alongside other policy discussions, as some U.S. lawmakers propose adding Bitcoin to reserve funds to help strengthen the dollar. While Rogoff admits that crypto is unavoidable in the shadows, he does not think it offers many benefits for the mainstream market.
Conclusion
Kenneth Rogoff emphasizes that while cryptocurrencies are gaining traction in the underground economy, the U.S. dollar remains dominant in regulated global finance. Even so, the evolving situation raises important future problems. As crypto is more widely used, economists must look at its impact on the economy, control of money and leadership in financial matters globally.
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FAQs
1. Why does Rogoff say the dollar is weakening?
Due to the rise of the euro, renminbi, and cryptocurrencies.
2. How is crypto used in the underground economy?
For tax evasion, regulation avoidance, and untraceable payments.
3. What risks does crypto pose to the dollar?
It could raise U.S. loan rates and harm national security.
4. Can crypto replace the dollar?
Not in legal markets, but it’s growing in underground use.
Glossary Of Key Terms
Kenneth Rogoff – U.S. economist, ex-IMF chief, Harvard professor.
U.S. Dollar Dominance – The dollar’s global power as the main reserve currency.
Underground Economy – Unofficial, unregulated market including tax evasion.
Tax Evasion – Illegally avoiding taxes, often using cash or crypto.
Exorbitant Privilege – The U.S. benefits from global use of the dollar.
IMF (International Monetary Fund) – Global group supporting stable economies.
Renminbi (RMB) – China’s official currency, also called the yuan.