The financial and economic chaos of 2020 is presently abundantly clear to everyone. Even the biggest optimist at the start of the global pandemic in February has taken a step back now, as the world’s economy enters its biggest challenge since 1929. Here, some analysts even believe that the challenge the global economy faces today is unprecedented in the history of international commerce, trade, and industry.
In that type of setting it is no wonder that the major currencies are also under a continuous onslaught ever since the markets crashed in March this year. Among all of them, the American dollar or the USD is expectedly taking most of the damage if for no other reason than the fact that it had international currency dominance for more than 70 years. The end of WW2 established it and the economic prosperity of the second part of the 20th century cemented it. However, the start of the 21st century had not become the American century as many hoped.
Now, the absolute devastation that is coming from the pandemic and national lockdowns is further deteriorating any sense of a USD supremacy. In that environment, all financial elements are bound to change and evolve, but now, it seems that bitcoin, in particular, is slowly taking up an important place in the newly-growing dynamic.
US Federal Reserve
There seems to be a level of fear in the White House and the Federal Reserve about the dominance of the USD. Furthermore, US President Donald Trump is also in line with this narrative. Bitcoin, as the main cryptocurrency in terms of market cap and price, features a lot of elements that are completely different not just to the dollar but any other fiat currency. It is a system that is embedded with a pre-defined scarcity and it exists outside of any government, internal or external. BTC token, like the rest of the cryptocurrencies, is only one part of a rising system. Today, it includes other technological challenges to the USD. In 2019, the most prominent one was the Facebook-developed Libra, which did not get to see the light of day.
However, it was also and continues to be the Chinese digitized yuan, which could be the main adversary to the USD, having in mind its actual political and economic potential. It is no wonder that both the current president and his government, as well as the US Federal Reserve, perceive these are a direct threat to the American financial and fiscal ecosystem – and with it, the ecosystem of the modern world in its present form.
US financial regulators, likely under the pressure of the overall financial ecosystem, decided to shut down the projects that the messaging app Telegram undertook. The fate of their decentralized crypto project seemingly once again ignited fears that the US government might once again try to shut down access of citizens to bitcoin and other cryptocurrencies. Pavel Durov, Telegram’s CEO and founder, said that the US court stopped messaging app’s TON network from happening.
This draws the line under almost three years of development without any results whatsoever. In 2018, Telegram, which is now Dubai-based and has over 400 million active monthly users, began by raising almost 1.7 billion USD from a range of over 200 private investors. This should have resulted in the TON network and its gram crypto token. However, just two months after that the SEC blocked the public fundraising process and then in October 2019 ordered Telegram to stop the sale of its gram tokens.
The agency found it in violation of the US Securities Act. Now, the final nail in the coffin of TON was put in, ending this venture in an undramatic manner. More worryingly, however, is the decision to stop TON from operating anywhere in the world, as a US citizen might find a way to access it. This implies sovereignty over other locations in the world, which is a very troubling concept for not just the crypto community.
In an unexpectedly heated response to the decision of the US court, Durov said that the US government is the entity behind decisions like this. This might be an odd idea at the time of esports and global social media, but the US government is wielding strong influence over companies like Google and Apple, which regularly delete apps and other products from their massively popular platform. The drive behind this is a strange hybrid concept that bridges market protectionism and economic expansionism.
A version of this existed in the US policy making ever since the end of WW2, but now, with the emergence of technology that is non-national and deregulated, the US is trying the same trick for a completely different day and age. Also, unlike its golden age in the post-WW2 period, the US has no alternative to push instead of the solutions coming from what it sees as its rivals. Instead, the asset it does have – the USD and its role in international trade – is slipping down from its throne more and more with each passing year. Presently, because of the COVID-19 coronavirus pandemic, the same process is only getting faster and more pronounced.
Alternatives Not Welcomed
US President possibility best-defined this sentiment for the wider public in the country. He said that the country only has one real currency. Besides, he also said that this currency is getting stronger, more dependable, and also more reliable all of the time. But, the sad reality of the US government and USD is the fact that old glory tends to dissipate when things do not go up in terms of GDP and political influence. Places like Syria and Venezuela showcase perfectly that the projection of American power in 2020 is nothing like it was just two decades ago.
This is even more substantial in the domain of finance, where the weird but strong resilience of bitcoin is baffling the experts but slowly winning over new users. Unfortunately for the citizens of the US, the government of Donald Trump, just like that of Barack Obama, is nowhere near blockchain-friendly. This in itself is the reason why the USD is losing out in the long-run if this setup remains unchanged.