Interbank Market News Scan: The crypto-digital world finds the fiat currency worthless …

30 July 2021

The Takeaway: The crypto-digital world finds the fiat currency worthless …

The past couple posts I have been harping on whether Amazon or Facebook can create a viable digital nation-state.  Right now, I am putting Amazon in lead, but if Facebook can create a more viable transactions-based economy rather than relying on being a pure private data aggregator and reseller, then Facebook may have the potential in the longer run to rival Amazon.

For now, occupants of the digital world are not placing any crypto-monetary value on fiat currencies.  I don’t see this no-value perspective changing any time soon on the part of digital world residents.  For example, according to OANDA data from twelve months ago, USD/ETH was priced at .0031.  Today, the price of USD/ETH is at .0004.  I believe the more closed-loop the digital world can remain, the less the digital world’s demand for fiat currency. 

Holders of cryptocurrency are still interested in holding crypto as an asset versus a medium of exchange for trade even though the rhetoric is quick to describe crypto as a payment system as well. Examples of commercial entities accepting crypto as payment should be discounted by the preference for holding crypto as an asset versus medium of exchange.

On the other hand, I am mindful that on a global basis crypto as a medium of exchange is creeping into consumer mindset with El Salvador’s decision to accept crypto as legal tender.  It is way too early to tell what degree of success crypto will see in the Central American nation.  In the meantime, public policy in the United States is to treat cryptocurrency as a digital asset and until the time comes where legacy nation-states view the digital world as a trade partner, USD/ETH and USD/BTC will be priced at zero for a while.

Alton Drew

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

Rates reported by the Federal Reserve (Release Date 29 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.07%

Prices

Exchange rates of interest as of 9:49 am EST

Currency pairExchange rate
AUD/USD*0.7371
EUR/USD*1.1884
GBP/USD*1.3965
USD/CAD*1.2434
USD/CHF*0.9061
USD/JPY*109.6500
USD/MXN*19.8480
USD/BTC+0.0000
USD/ETH+0.0004
Sources: *Reuters +OANDA

Interbank Market News Scan: France takes a closer look at Apple, Google as payment systems, platforms …

Foreign currency exchange rates of interest …

Currency PairsRates as of 10:28 am EST 28 April 2021Rates as of 9:13 am EST 29 April 2021Increase/decrease in pips
EUR/USD1.18771.1877No change
GBP/USD1.38961.3831-65
USD/CAD1.25461.2551+5
AUD/USD0.76130.7625+12
USD/JPY110.6250110.0830-5,420
USD/NOK8.51948.5035-159
USD/CHF0.92950.9135-160
USD/SEK8.71668.7177+11
USD/MEX20.257120.2571No change
USD/XCD2.70002.7000No change
USD/JMD147.1020145.180-19,220
USD/DOP56.157556.1575No change
USD/HTG79.338283.8141+44,759
USD/BSD1.00001.0000No change
Source: OANDA

News links you should be following …

Payment systems. The Bank of Thailand (BoT) and the Monetary Authority of Singapore (MAS) today launched the linkage of Thailand’s PromptPay and Singapore’s PayNow real-time retail payment systems. In a joint statement, the BoT and MAS said the linkage, the first of its kind globally, will enable customers of participating banks in Thailand and Singapore to transfer funds of up to S$1,000 or 25,000 baht daily across the two countries, using just a mobile number. Thailand, Singapore launch world’s first linkage of real-time payment systems | The Edge Markets

Payment systems. The launch of Saudi Arabia’s first instant payments system is another step towards the kingdom’s ambitious proposals to have a 70 percent cashless society as part of the Saudi’s Vision 2030, according to Takreem El-Tohamy, general manager, IBM Middle East and Africa. Saudi launches instant payment system in drive towards cashless society – Arabianbusiness

Payment systems. Embracing new payment rails, and enhancing the value of existing ones, remains a key part of promoting overall payment innovation. But as real-time payment networks proliferate, a new challenge is on the rise: enabling interoperability between these rails on both a domestic and international scale. Real-Time Payments Seek Interoperability | PYMNTS.com

Payment systems. Digital payment services developed by U.S. tech giants such as Apple and Alphabet’s Google risk reinforcing their market power by giving them greater sway over consumers’ data, France’s antitrust authority said on Thursday. French watchdog warns of big tech’s sway over payment services (yahoo.com)

Payment systems. The government is committed to implementing the electronic wages or “e-wages” system as soon as possible to ensure employees get paid in “real-time”, following the wake of the apparent suicide of a foreign worker several weeks ago over allegations of unpaid wages. HR minister vows e-wages system to ensure ’real-time’ payment, after employee’s death (msn.com)

Central banks. Cryptocurrencies aren’t going anywhere in the coming years, but their usage will probably decline when central bank digital currencies (CBDCs) are eventually rolled out, according to Deutsche Bank International Private Bank. Cryptocurrencies will survive the rise of central bank-backed digital coins, but their use will likely decline, Deutsche Bank says | Currency News | Financial and Business News | Markets Insider (businessinsider.com)

Central banks. Central bank digital cash could give new types of businesses access to ultra-cheap central bank funding and lessen the role of big banks in settling large transfers, a senior Bank of France official said on Thursday. Central bank e-cash could ‘challenge’ role of big banks, Bank of France says | Reuters

Cryptocurrency, ether, bitcoin. Ether hit an all-time high Thursday as bitcoin’s dominance of the cryptocurrency market declined. The world’s second-largest digital currency by market value surged to a fresh record of $2,774 Thursday morning, according to data from Coin Metrics. Bitcoin, the top digital coin, was slightly lower at a price of $54,471. Digital currency ether hits a record high, stealing bitcoin’s limelight (msn.com)

Interbank Market News Scan: Iran finds an end around on US sanctions by providing crypto an underlying economy…

Foreign exchange rates of interest ….

Currency PairsRates as of 4:46 pm EST 26 April 2021Rates as of 6:20 am EST 27 April 2021Increase/decrease in pips
EUR/USD1.18901.1897+7
GBP/USD1.38691.3855-14
USD/CAD1.25681.2568No change
AUD/USD0.76020.7613+11
USD/JPY110.5960110.6250+290
USD/NOK8.52458.5186-59
USD/CHF0.94170.9421+4
USD/SEK8.71778.7166-7
USD/MEX20.284420.2953+109
USD/XCD2.70002.7000No change
USD/JMD144.9940145.1800+1,860
USD/DOP56.316456.3164No change
USD/HTG79.085979.0859No change
USD/BSD1.00001.0000No change
Source: OANDA

News links you should be following …

Payment systems. The share of Russian exports settled in US dollars has dropped below 50%. The decline, recorded in the fourth quarter of 2020, reflects Moscow’s policy of cutting the Russian economy’s reliance on the greenback. Most Russian exports have now kicked reliance on US dollar as payment currency — RT Business News

Payment systems. Amazon is expanding its palm-scanning payment system to a Whole Foods store in Seattle, the company announced Wednesday, the first of many planned rollouts at other locations. Amazon will initially roll out Amazon One at the Whole Foods in Seattle’s Capitol Hill neighborhood, not far from the company’s headquarters, before launching the system at seven Seattle-area Whole Foods in coming months. Amazon is bringing palm-scanning payment system to Whole Foods stores (msn.com)

Payment systems. Business technology company Deluxe (DLX) has agreed to acquire First American Payment Systems for $960 million in cash, the company said in a statement. Deluxe believes that this deal will accelerate the company’s transformation into a leading payments technology company as part of its “One Deluxe” strategy. Deluxe To Buy First American Payment Systems For $960 Mln Cash | Nasdaq

Central banks, Riksbank. Sweden’s central bank kept monetary policy unchanged on Tuesday as expected, vowing to support the economy as long as needed amid uncertainty over the speed of recovery from the effects of the pandemic. Swedish central bank leaves policy unchanged amid COVID uncertainty | Nasdaq

Central banks, Central Bank of Iran. A developing strategy to mitigate the crippling effect of economic sanctions could see cryptocurrencies being used by Iranian firms to pay for imports such as raw materials and electronics. Iran is continuing to explore the potential use of cryptocurrency as a tool for mitigating the devastating impact of economic sanctions imposed by the United States.  Iran’s central bank says officially mined crypto can be used to pay for imports (cointelegraph.com)

Central banks, Riksbank. A period with inflation over the 2% target of the Swedish central bank would not be a big problem, Governor Stefan Ingves said on Tuesday after the central bank kept policy unchanged. Swedish c.bank’s Ingves says not big worry if inflation overshoots (msn.com)

Interbank market news scan: The United Kingdom moves closer to adopting a central bank digital currency; other news…

Links you should be following:

Central banks, Bank of England. The UK is ahead of the curve when it comes to digital currency adoption, according to new research. A report by PwC reveals the UK is fifth in the world when it comes to preparing for the adoption of a central digital currency although a consumer offer remains a while off yet. UK leads race across Europe to introduce interbank digital currency (msn.com)

Central banks, Central Bank of Nigeria. It is the norm to hear talks around the need for convergence in Nigeria’s foreign exchange (FX) markets. This implies that there is mispricing. Historically, this mispricing has always been between the parallel market rate, which trades at a premium to the CBN’s managed rates across different FX windows. Liquidity, price discovery in Nigeria’s FX market Opinion — The Guardian Nigeria News – Nigeria and World News

Central banks, Federal Reserve. Excess cash in the financial system has pressured overnight interest rates, in some instances pushing them negative, which, analysts said, could prompt the Federal Reserve to lift the short-term rates it manages. EXPLAINER-U.S. repo market flirts with negative rates as Fed seeks to absorb excess cash | Nasdaq

Central Banks, Central Bank of the Bahamas. The Bahamas and Cambodia rank as the two top central bank digital currencies. Bahamas Ranks First in CBDCs, China’s Digital Yuan Third: PwC Report – BeInCrypto

Central banks, Central Bank of India. The rupee advanced by 23 paise to 74.64 against the US dollar in opening trade on Tuesday, tracking weaker dollar against key rivals and a positive trend in the domestic equity market. Forex traders said the government’s decision to open COVID vaccination to all above 18 years from May 1 lifted investor sentiment. Rupee Rises 23 Paise to 74.64 Against US Dollar in Early Trade (msn.com)

The market is opening. The rates to start your day:

As of 8:59 am, Bloomberg reports that the three month yield on U.S. Treasurys is at 0.02% while the two-year comes in at .16%. The ten-year Treasurys are trading at 1.60% and 2.30%, respectively.

The Federal Funds rate, the rate at which banks lend to each other overnight in support of their reserve requirements, is at .07%, while the Fed Funds target rate is still at .25%. The prime lending rate is 3.25%.

The Opening Takeaway: I Expect the Federal Reserve, US Treasury to Pull the Trigger on Cryptocurrency.

Yesterday, the markets saw some pull back in shares for Coinbase (Nasdaq:COIN) with the cryptocurrency exchange closing yesterday at $332.75, down from a high of $409.62 back on 14 April. The pull back was reportedly expected among some analysts as some investors took a little cream off the top. From a market perspective, I was not impressed with the offering. In the end, Coinbase is a market exchange platform for cryptocurrency relying on transactional fees for its survival and maintaining credibility among market participants as an information finder and margin provider for traders.

How well Coinbase does is a direct function of how well cryptocurrency does. As long as cryptocurrency stays in its digital asset lane, it may need not worry about too much regulation. Should it dip its toe further into the currency lane, that is where bitcoin, ethereum, dogecoin, etc., may find themselves in a world of hurt.

A currency’s legitimacy comes from the “king.” The king airdrops the currency throughout his jurisdiction for the purpose of washing and compounding it through a jurisdiction’s merchants, producers, and consumers. The currency says a lot about the economic value of the king’s jurisdiction and to maintain the prevailing narrative the currency represents, the king must control or heavily influence its value and circulation. The decentralized financial mechanism that cryptocurrency survives on does not fit into the command and control scheme of the king.

So far the US Federal Reserve has been ambivalent about its view of cryptocurrency. The US Treasury has been a bit clearer about its view of cryptocurrency as a currency based on Janet Yellen’s concerns about cryptocurrency being used for nefarious activities such as money laundering and drug trafficking. Neither the Federal Reserve or the US Treasury has expressed their concerns based on the philosophical underpinnings of currency, but I believe that when it is time for the central bank and the Treasury Department to pull the public policy trigger, control of the currency will be the ultimate public policy rationale.

Countries such as The Bahamas and Cambodia (see the links above) are not waiting. In the interbank, foreign currency exchange world, The Bahamas and Cambodia are near non-existent, but in the digital space they are the leaders in issuing central bank digital currency, taking digital payments to the next level. Over 60 countries are experimenting with or planning deployment of central bank digital currencies where their fiat currencies are tethered to block chain digital technology. Critics argue the point that outside of the digital tethering, a central bank issued digital currency does not increase the value of the fiat currency much. Maybe.

Other than requiring more use out of your cellphone or apps on your desktop, a central bank bank-issued digital coin may seem like mere aesthetics, but what is being ignored is the increased control that the government and central banks can exercise over the currency. Taking it to the extreme, I can see a government requiring that all transactions conducted within its jurisdiction be done via its central bank-issued digital currency with the primary reason being ensuring the collection of taxes on these transactions while better monitoring nefarious activities. I can see such a move beginning in countries that place less emphasis on free markets or individual privacy. The US will hem and haw over such a move especially when it sees China doing it, but if digitisation puts China out further ahead then I can see the United States capitulating to the new digital reality.

As for bitcoin, ethereum, and other cryptocurrencies, they may end up staying in the digital asset space. Their calling card is built on decentralized finance and opaqueness. They won’t become universally used currency for the masses.

Interbank market news scan: Cryptocurrency advocates moving to bolster their advocacy prowess in DC …

Digital currency. Atlas Organization founder Dr. Jonathan Ward, an expert on Chinese global strategy, discussed how the Biden administration can create competitive policies against China and argued that creating its own digital currency that is controlled by its central bank will “offset” U.S. sanctions, during an interview on FOX Business’ “Mornings with Maria.” China creating own digital currency will ‘offset’ US sanctions: Jonathan Ward | Fox Business

Foreign exchange, digital yuan. The United States’ reliance on economic sanctions to coerce other countries is gradually losing its effectiveness and slowly degrading one of Washington’s most influential tools in international affairs, the power of the U.S. dollar, experts told Newsweek. Sanctions Are Destroying U.S. Dollar’s Status as World’s Top Currency (newsweek.com)

Cryptocurrency. Even as cryptocurrencies steadily gain support on Wall Street, they’re still regarded by regulators as a tool for criminals to conceal shady transactions — posing a challenge to the nascent industry as it seeks to win wider respect. Bitcoin (BTC USD) Cryptocurrency Price News: Industry Forms Lobby to Shed Image – Bloomberg

Digital currency. A cyber yuan gives Beijing power to track spending in real time. Importantly, it’s money that isn’t linked to the dollar-dominated global financial system. Anxiety in the US as China Creates the First Major Digital Currency (thestreet.com)

Foreign exchange, India. Currency exchange rates can turn out to be a real dealbreaker and can cause a dent in an individual’s pocket who is traveling overseas. Even a difference of a few paise while doing currency conversion can make a huge difference in the budget for the trip. It becomes crucial to be aware of the various options while doing currency exchange. Currency Exchange and the related details (msn.com)

Cryptocurrency, Ethereum. Blockchain technology Ethereum has seen its price reach a new all-time high of $2,150 following Visa’s decision to allow cryptocurrency for transactions on its platform. World’s second-biggest cryptocurrency Ethereum hits new high of $2,150 after Visa agrees to allow crypto-payments on its network (msn.com)

Digital currency, Bank of Japan. Japan’s central bank has started trials of a new digital currency in an effort to experiment with how it might be used, the Bank of Japan announced on Monday. The announcement comes after the Chinese government revealed it was doing something very similar with a digital yuan in early March. Japan’s Central Bank Launches One-Year Test of Digital Currency (gizmodo.com)

Currency PairsRates as of 2:30 pm 6 April 2021
EUR/USD1.1853
AUD/USD0.7661
GBP/USD1.3809
USD/JPY109.8700
NZD/USD0.7044
USD/CHF0.9322
USD/NOK8.5005
USD/SEK8.6312
USD/CAD1.2553
  
Selected Rates 
Fed Funds.07
Bank prime rate3.25
Discount window.25
2-yr Treasury.16
10-yr Treasury1.65
30-yr2.31
Source: Bloomberg, Reuters

Interbank market news scan: Crypto rates fall as crypto exchanges seek more support from traditional finance platforms …

The takeaway:

Cryptocurrency exchanges are doing their best to gain increased legitimacy in the world of finance by hiring advocates with knowledge of Washington or taking their increasing valuations on to publicly traded stock exchange platforms. Meanwhile, the Federal Reserve’s decision today to maintain its fed funds rate may continue to drive more investors toward cryptocurrencies as the dollar continues to fall in value relative to other currencies. With low-rates expected through 2023, there is no end in sight for increased crypto valuations, although hiccups are expected along the way. This is not to say that crypto will maintain its hold on the digital currency space. Bitcoin, for example, is not truly anonymous, according to Digitex CEO Richard Byworth. If that is the case, does that give non-anonymous central bank digital currencies less competition in the future?

Also, cryptocurrency saw another fall in valuation as of 11:07 pm EST 17 March 2021.

To see what we’re following, follow the links …

CFTC should review crypto because it’s exploding: Baucus. https://www.bloomberg.com/news/videos/2021-03-12/cftc-should-review-crypto-because-it-s-exploding-baucus-video

Goldman, Citi lead U.S> banks plowing billions into China. https://www.bloomberg.com/news/videos/2021-03-17/goldman-citi-lead-u-s-banks-plowing-billions-into-china-video

Bitcoin may rise to $175,000 by year end. https://www.bloomberg.com/news/videos/2021-03-15/bitcoin-may-rise-to-175-000-by-year-end-diginex-ceo-video

Coinbase Global, the largest cryptocurrency exchange in the US, on Wednesday revealed that the company now has a valuation of $68 billion ahead of its planned direct listing due in large part to recent private transactions, Reuters first reported. https://markets.businessinsider.com/currencies/news/coinbase-ipo-valued-68-billion-ahead-direct-listing-bitcoin-cryptocurrency-2021-3-1030220737

Creator who sold NFT house for $500,000: “We’ll be living in an augmented reality lifestyle soon.” https://www.cnbc.com/2021/03/17/creator-of-first-nft-digital-house-krista-kim-on-augmented-reality-.html

Cryptocurrency exchange rates as of 17 March 2021 11:07 pm

BTC/USD=56,150.30 ETH/USD=1,771.60

BTC/EUR=47,097.80 ETH/EUR=1,485.99

BTC/GBP=40,364.90 ETH/GBP=1,273.55

BTC/AUD=72,505.00 ETH/AUD=2,287.61

BTC/CAD=69,904.10 ETH/CAD=2,205.55

BTC/CHF=51,975.70 ETH/CHF=1,639.89

BTC/JPY=6,124,550.00 ETH/JPY=193,236.00

BTC/CNY=365,010.00 ETH/CNY=11,516.50

Source: OANDA

18 March 2021 12:14 am EST

Interbank market scan: China’s interbank market rate drops; Bitcoin sees a little deceleration …

Links to news you should be following …

India’s foreign-exchange reserves surpassed Russia’s to become the world’s fourth largest, as the South Asian nation’s central bank continues to hoard dollars to cushion the economy against any sudden outflows. India FX Reserves Cross Russia to Become World’s 4th Biggest – Bloomberg

Currency tensions and currency crises are a side effect of many countries failing to manage in the new round of economic globalization that has taken place through increasing flows of multilateral trade and investments that have created a world of currency trades causing economies to depend on global reserve currencies, mainly the US Dollar. Science against Myth (msn.com)

During the past month, the total value locked (TVL) in the Bancor Protocol has more than doubled, surpassing the $1.6 billion mark. Bancor, which serves as a liquidity protocol that enables automated, decentralized exchange, reveals that it managed to break into the top 10 projects in terms of TVL and now generates “the fifth highest revenue” of any protocol on Ethereum (as of March 13, 2021). decentralized finance – Bing News

To add more value to the network’s end-users and keep FinNexus at the industry’s cutting edge, its team has been working extremely hard to introduce new features. FinNexus has been developing its ecosystem on all fronts, expanding an established partnership with ChainLink, striving to add a new decentralized product, and introducing an algorithmic stablecoin-based liquidity pool to its platform.  FinNexus developments take its decentralized options platform to the next level | KnowTechie

The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, fell 10.5 basis points to 2.14 percent Tuesday.China’s overnight Shibor interbank rate falls Tuesday – Xinhua | English.news.cn (xinhuanet.com)

Cryptocurrency exchange rates as of 8:35 am EST …

BTC/USD=57,494.80 ETH/USD=1,792.44

BTC/EUR=48,177.40 ETH/EUR=1,501.96

BTC/GBP=41,325.00 ETH/GBP=1,288.34

BTC/AUD=74,221.30 ETH/AUD=2,313.90

BTC/CAD=71,715.70 ETH/CAD=2,235.79

BTC/CHF=53,398.50 ETH/CHF=1,664.74

BTC/JPY=6,274,470.00 ETH/JPY=195,611.00

BTC/CNY=373,759.00 ETH/CNY=11,652.20

Source: OANDA

Interbank market news scan: Cryptocurrency exchange rates. India moves closer to banning crypto…

Crypto-foreign exchange rates …

BTC/USD=57,204.20 ETH/USD=1,771.42

BTC/EUR=47,844.90 ETH/EUR=1,481.59

BTC/GBP=41,071.20 ETH/GPB=1,271.84

BTC/AUD=73,643.60 ETH/AUD=2,280.49

BTC/CAD=71,357.70 ETH/CAD=2,209.70

BTC/CHF=53,141.60 ETH/CHF=1,645.61

BTC/JPY=6,236,150.00 ETH/JPY=193,112.00

BTC/CNY= 372,220.00 ETH/CNY=11,526.40

Source: OANDA

What are we following? Follow the links….

India will propose a law banning cryptocurrencies, fining anyone trading in the country or even holding such digital assets, a senior government official told Reuters in a potential blow to millions of investors piling into the red-hot asset class. India to Propose Cryptocurrency Ban, Penalising Miners, Traders (fxempire.com)

With the introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India has pivoted towards a complete ban on cryptocurrencies other than sovereign cryptocurrencies; a stark departure from the traditional laissez-faire stand towards regulating cryptocurrencies. Skipping Regulation & Banning Cryptocurrency: A Lackadaisical Legislation Without Legitimate Aim? (entrepreneur.com)

Interbank market scan: Ether makes headway ahead of Bitcoin …

Follow the links …

Ethereum blockchain developers approved one of the biggest changes to the network since its inception in 2015, a shift that could spur even bigger gains in the price of its native cryptocurrency Ether. Crypto Coin Outperforming Bitcoin Is About to See Supply Reduced – Bloomberg

With expectations for inflation and growth taking flight, traders are signaling that they anticipate the Fed may have to respond more quickly than it’s indicated. Eurodollar futures now reflect a quarter-point hike in the first quarter of 2023, but they’re starting to suggest that it could come in late 2022. Fed officials have projected they’d keep rates near zero until at least the end of 2023. Bond Traders Go All-In on U.S. Treasury Market’s Big Short Bet – Bloomberg

Central banks helped save the world economy from depression as the pandemic struck. Now they are dealing with the hard part: managing the recovery amid a difference of opinion with investors. Central Banks Face Jumpy Bond Market With 10 Days of Decisions (yahoo.com)

Earlier, there was an impression that it was due to pent-up and festival demand. But now, it is genuine demand that is visible. The vaccination drive is giving greater confidence to consumers, so the demand is expected to sustain. The only downside risk is the recent spike in the number of Covid cases in certain parts of the country. Central banks in no rush to raise rates, will back growth: Shaktikanta Das (msn.com)

But I think we have to scratch a little bit below the surface, and what you will find is that despite the good news, which is predominantly in the US and in China, this is still a very incomplete recovery globally. What you see is yes, the US and China will have complete recoveries, but the global economy despite this improved outlook is still going to be about 4 percentage points below the pre-pandemic path, which is great. Now that fiscal policy has come to forefront, central banks need to step back a little: Sajjid Z Chinoy (msn.com)

What is the DYX Index? What Is The DXY Index? (yahoo.com)

7 March 2021

A problem for the US government is that in twenty years time, the dollar may be a reserve currency for the unwashed…

The current crypto play …

Bitcoin and Ethereum continued their gains this week. The BTC/USD pair has climbed 10.4% to 50,415.50 USD from its value on 1 March 2021, while the ETH/USD pair has climbed 9.6% to 1,565.26 USD over the same period. The BTC/EUR and ETH/EUR pairs also climbed 10.4% and 9.6%, respectively between 1 March and 4 March 2021. The BTC/GBP and ETH/GBP pairs have followed suit with increases of 10.2% and 9.4%, respectively.

Source: OANDA

Another example of more practical crypto use: NFTs

Rock group Kings of Leon recently announced that they are dropping a new album in the form of a non-fungible token, A non-fungible token is a type of cryptocurrency that holds assets like art, tickets, or music and operates on blockchain technology. According to an article in The Rolling Stone, music groups are exploring NFTs as a way to offset two decades of losses due in great part to streaming where consumers are gaining access to an artist’s product at next to nothing costs.

While some may view this type of cryptocurrency as nothing by coupons on steroids, I believe the ability of individuals, groups, and institutions to turn their brands into micro-economies creates a long term problem for governments. For example, as a Kings of Leon NFT comprised of intricate digital art work grows in popularity over the years, it becomes a tradeable asset with increasing gains. Not only will it be tradeable for dollars, but it will be traded for other NFTs or other digital assets issued by your “utility” platforms. Kroger, Southern Company, and Delta may accept from a resident of Atlanta a NFT in exchange for a certain amount of groceries, energy, or airline tickets.

In the future, for consumers who are denied access to private platforms where they can trade for NFTs or other digital assets, they may be stuck with the dollar as their only currency. The future problem for the US government could be that a reduced network effect resulting from a fall off in use of its payment system may find government forced to shift more of the cost burden onto poorer citizens with no access to private platforms. Will government have to redesign its purpose in order to meet a potential shift in the use of its payment systems? And if so, how should that shift look?

4 March 2021, 1:22 pm EST