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The inevitable decentralization of “Reserve Currency”

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When I buy a lunch box at a restaurant in Tokyo, I sometimes have upwards of 15 options for payment. I can pay with cash, credit, debit, ApplePay, GooglePay, PayPay, LinePay, AliPay, Wechat, Square, point card, Suica or Passmo (subway IC card) and a few more I haven’t figured out yet. These are all using Japanese Yen or some automatic transfer of international currency to JPY.

It’s also looking more and more like bitcoin will become acceptable everywhere someday soon. Whether it be through a crypto card, like that that crypto.com or coinbase have attempted, or whether it be through PayPal and Square, or direct crypto transfers, it’s coming. And if we can use Bitcoin we can essentially be able to use all kinds of other cryptocurrencies.

Look at all these options. It’s nearly limitless.

Each shop can choose which methods they accept, but there are intermediaries which make it easier to accept a wider variety because they automatically transfer it to the vendors preferred payment method.

If shops can do this, what’s to stop countries?

My father often says it’ll be “bad news if the US Dollar loses its status as the world reserve currency”. He imagines that it’ll be replaced by Ren min bi. If that’s what happens, I agree, it would be pretty bad news for the world. Out of the frying pan and into the fire.

But I don’t think the trend is moving in that direction. I don’t think any other country has the stomach to dominate the world like the US has. They certainly are trying, but the US’s biggest competitor doesn’t know how to keep allies and doesn’t think it needs to. At the same time, Bitcoin is going nowhere but up, and it’s bringing crypto and blockchain with it to all corners of the globe.

I think a much more likely scenario is that countries and large international corporations will have lists of acceptable reserve currencies with each trade partner.

Ukraine wants to do business with some other European countries tech industry...they can pay in USD, G7 coin (hypothetical), RMB, BTC or Google coin (hypothetical).

Singapore wants to trade with Brazil. They can use BRICS coin (hypothetical), BTC, ETH, Russian ruble, RMB or USD.

Perhaps a discount could be given if the entities preferred currency is used. There may also be intermediaries to help facilitate transactions for two parties with incompatible lists of acceptable currencies.

The way US dollars are being printed, I think it’s safe to say that it’s status as THE reserve currency is in danger. But with the growing trend towards decentralization, I see this as a much more likely outcome than another country taking its place, and if international organizations are hoping to replace the USD as a main reserve currency with their own new digital currency, I’m not so sure they can do so in time.

With El Salvador ready to adapt bitcoin as legal tender and other countries looking to do the same, it won’t be long until these countries begin to trade in bitcoin. What happens when a country with more ties to powerful countries do the same? What happens if these countries develop on their own as strong hubs of industry? Bitcoin will undoubtably become a reserve currency as well.

Because it functions much better as a store of value than a unit of exchange, I don’t think bitcoin will become THE reserve currency. I don’t think the most powerful countries are going to give up their currencies any time soon, although they will certainly evolve, change in value, and become less prominent.

This could potential be a great thing because it will make it harder for any one country or entity to bully others, leading to more decentralization of power. It could also force countries to cooperate more in order to create more value for their currency of choice, whether it be their own national currency, Bitcoin or something else.

I’m not sure how long this might take but I imagine it will start moving in this direction as soon as soon as a few more countries follow El Salvador I’m fully embracing bitcoin, and within 10 years, countries will be able to pay with as many options as we will when shopping for goods.

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