The growing adoption of cryptocurrencies poses a challenge to the US dollar's status as the world's preferred reserve currency, said Ken Jacobs, the Chief Executive Officer of financial advisory and asset management firm Lazard, Ltd.
In an interview with Bloomberg, Jacobs claimed that the United State's unilateral trade policy, as well as its unilateral foreign policy, is encouraging other economies to look for alternative foreign reserves. He said that the U.S. dollar's status as the world's reserve currency is substantial proof of what soft power means.
Jacobs shared his insights:
“There's enough technology out in the world today with cryptocurrency and changes going on that you can imagine if you let your mind wander a little bit, which something becomes an alternative in the future .”
For more than 50 years, the US dollar has enjoyed unopposed status as the international currency of choice by most countries because of the perceived stability it provides in the global markets. This has allowed Washington to keep its borrowing costs at bay and aid in financing the nation’s budget deficit as the US trading partners allocate their dollars in Treasuries.
According to Jacobs, the threat to completely replace the US currency's status remains a distant possibility because the nearest competitors, like Europe's euro and the Chinese yuan, are still far from becoming the international currency of choice.
However, Jacobs foresees a long-term risk to the US, particularly if policymakers fail to put into place the immigration reforms that are necessary to supplement economic growth in the future.
Steve Wozniak: Bitcoin should be single global currency
Jacobs’ thesis on cryptocurrencies becoming a global currency reserve is shared by Apple co-founder Steve Wozniak, who said last week that Bitcoin has the capability of becoming the world’s single currency because of its “purity” and lack of centralization.
“I buy into what Jack Dorsey says, not that I necessarily believe it's going to happen, but because I want it to be that way, that is so pure thinking,” Wozniak said in an interview.