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Will Crypto Tokens Reserve Beat USD as International Currency?

The global dollar is not just a term because the USD is considered the International Reserve Currency. From global trades to payment systems like SWIFT, all global financial systems hold the USD reserve as the financial standard. However, the rise & adoption of cryptos raises the question — could Crypto Tokens Reserve overtake USD as the International Reserve Currency?

Why is USD The International Reserve Currency?

According to The Bretton Woods Agreement, the global currencies were pegged to the USD, and the dollar replaced or rather linked to the value of gold. The declaration was made while keeping in mind that foreign exchange should not put any country at a disadvantage.

Crypto Tokens Reserve

Following the agreement, countries began to stockpile USD currency instead of gold and, thereon, began purchasing the U.S. Treasury securities to store their dollars. However, soon after the U.S. market began to flood with paper money, President Nixon intervened and de-linked the gold from the dollar, establishing the floating exchange rates of today.

Does a Crypto Tokens Reserve Hold Any Worth?

The earliest crypto token known as Bitcoin dates back to 2014, created by an anonymous entity known as Satoshi Nakamoto. Its whitepaper explains the purpose and use cases, essentially made to hold value based on its limited supply. After its rise in 2018, whose ripple effect in 2020 established the crypto market, it was alleged to become the International Reserve Currency Standard. So why didn’t it?

Crypto Tokens Reserve

Parallelly, several cryptocurrencies today are pegged to the value of the USD, known as Stablecoins. Some nations recognize these Crypto USD currencies as Virtual Digital Assets based on their design. However, despite whatever the value the cryptos like Bitcoin (BTC), Ethereum (ETH), etc., may hold, nations or their federal reserves and central banks still won’t recognize them as a currency.

In contrast, some nations have legalized crypto exchange or extensively adopted cryptos as a mode of payment. So, let’s learn why the Crypto Tokens Reserve can be established as International Reserve Currency and why it may not work!

5 Reasons Crypto Tokens Reserve Can Replace USD!

The battle between crypto USD is not exclusive, with multiple contenders that hold the potential to become the reserve currency.

The foremost is the Euro, the most used reserve currency across multiple nations. However, it lacks a central Treasury Unit. Second in line with a stronger potential is the Chinese Renminbi, which is a concerning matter for several reasons TBD.

But, despite these known currencies, here are 5 reasons that make a crypto USD takeover feasible!

Crypto Tokens Reserve

» Decentralized

Most of the global wealth, particularly US wealth, is owned by 10% of the citizens. Such financial inequality is the major driving factor behind the adoption of cryptocurrencies. Here, cryptos managed by Decentralized Autonomous Organizations (DAOs) can be a boon for the 90% of the population who desire financial equality.

» Digital Ownership

Fiat currencies are regulated by central authorities, which largely cannot adapt to digitalized finance due to infrastructure and other reasons. While CDBC and ECash Act aim to challenge these conditions, not all countries can embrace the digital ownership offered by crypto assets.

Having a crypto tokens reserve run by smart contracts can ease crypto adoption while removing the intermediaries.

Crypto Tokens Reserve

» Alternative Currency

Individuals can determine the value of cryptos without regard for the nation’s reserve currency. Parallelly, it also implies that Crypto Sanctions, unless imposed allow nations to skirt financial sanctions imposed by other countries. For instance, after being laden with numerous US sanctions, the Russian economy can actually play a role in realizing the crypto USD takeover.

» Immutable Blockchain Ledgers

One critical driving force behind establishing a crypto tokens reserve is that it all runs on blockchains. Blockchains and their ledger records are immutable and cannot be destroyed or modified while allowing scalability. It translates to cryptocurrencies being non-replicable despite whatever anyone might try.

Crypto Tokens Reserve

» Traceable

Unlike fiat currency, which cannot be traced completely, cryptos can be traced to crypto wallets. Similarly, crypto-assets can also be traced to digital wallets, which makes it easier for law and enforcement agencies and Securities Exchange Boards to track frauds, money laundering, etc., illegal activities.

3 Reasons Crypto Tokens Reserve Won’t Replace USD!

Although the crypto USD takeover promise seems worthwhile, it has significant drawbacks. Those drawbacks concern the global audiences and all the national economies as a whole. Therefore they must be deemed severe and possibly non-reversible.

» Crypto Whales

The crypto tokens reserve seems optimal in a world where every person owns value equally or responsibility. However, the crypto market has several whales that possess a majority of cryptos. For instance, 5 million BTC tokens (+$220 billion) are owned collectively among 10,000 BTC wallets. In more statistically realistic figures, only 0.01 percent of the BTC control over 27% market value.

Such a scenario existing within the crypto sector makes it worse than its existence in the global fiat currency market. Without a Central Authority to govern its use and exchange, people owning such cryptos are left at the whims of those Crypto whales.

» Digital Volatility

Another strong aspect hindering the crypto USD takeover is that digital wallets, which contain crypto tokens and assets, can be hacked. Losing access to such wallets or having its information leaked on unreliable platforms like Discord can invite scams and bankruptcy for investors.

Furthermore, the Crypto Terra LUNA incident educated the global masses on how quickly a top crypto, a stablecoin, can crumble flat.

» Evolving Web3 Space

The world of crypto and the crypto market is still evolving, and its infrastructure is continuously being rebuilt or enhanced. Surely this is good news for Web3 companies and crypto platforms, but it essentially zeroes the factor of reliability offered by Central Reserve Banks.

In a crypto USD takeover, the audiences and the owners of crypto cannot become independent without frequently subjecting themselves to the use of Web3 technologies.

Final Words

Establishing a crypto tokens reserve seems attractive on the surface, based on the crypto bubble gains from 2021. However, crypto market 2022 realities have shown the world a bitter picture of what happens when the value collapses. Still, there is hope for a crypto USD takeover, based on how global authorities like FSB and IOSCO regulate crypto.

FAQs

Which crypto currency is best for future?

The top cryptos continue to hold certain respective values despite the crypto crash in early 2022. However, determining the best cryptocurrency for the future depends on factors like investor capital and other criteria such as use cases of the crypto, its consensus mechanism, etc.

What crypto is backed by US dollar?

Stablecoins are known to be backed by the fiat currency USD as a means of keeping their value stable and less volatile based on market conditions. However, after the Terra LUNA incident, algorithmic stablecoins are now less trusted in the market, likely negatively affecting the possibility of a crypto USD takeover.

Will there be a crash in crypto?

The recent Terra LUNA token crash continues to affect the market, with several crypto exchanges filing bankruptcy. The LUNA incident has been said to wipe +$100 billion off the market in mere moments. Following it, major cryptos like BTC continues to be under the $20k mark from their peak high in Nov 2021 at over $64k.

Does crypto affect the value of the dollar?

No, crypto does not affect the dollar’s value despite its relevance in today’s market. While crypto tokens are used as an alternative mode of payment and owned digitally as assets, the crypto USD takeover is unlikely to happen.

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