BOE head urges digital currency to end dollar dominance

25 Août, 2019, 14:53 | Auteur: Auguste Feret
  • Jerome Powell chairman of the U.S. Federal Reserve left and Mark Carney governor of the Bank of England, walk the grounds during the Jackson Hole economic symposium sponsored by the Federal Reserve Bank of Kansas City in Moran Wyoming U.S

Aug 24 ― Bank of England Governor Mark Carney took aim at the U.S. dollar's "destabilising" role in the world economy yesterday and said central banks might need to join together to create their own replacement reserve currency.

Mark Carney proposed the idea of replacing dollar with a virtual currency for global trade. "By reducing the influence of the USA on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies".

"While the world economy is being reordered, the U.S. dollar remains as important as when Bretton Woods collapsed", Carney said, referring to the end of the dollar's peg to gold in the early 1970s.

He also warned that these dynamics had increased the risks of a "global liquidity trap".

China's yuan represented the most likely candidate to become a reserve currency to match the dollar, but it still had a long way to go before it was ready, Carney said. And to create a better IMFS, he advised countries to consider every opportunity, including those presented by new technologies.

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The Guardian reports that the Bank of England governor was addressing fellow central bankers when he said that dollar-hoarding by governments has led to a decade of ultra-low interest rates and low inflation.

Now, in his speech at the Federal Reserve Symposium, Carney was more specific.

Carney suggested the use of a "Synthetic Hegemonic Currency" that could be provided by the public sector through a network of central bank digital currencies.

"The dollar's influence on global financial conditions could similarly decline if a financial architecture developed around the new [digital currency] and it displaced the dollar's dominance in credit markets".

"The relatively high costs of domestic and cross border electronic payments are encouraging innovation, with new entrants applying new technologies to offer lower cost, more convenient retail payment services", Carney explained.

Mark Carney wants the USA dollar to lose its status as the global reserve currency, pitching the idea that a digital currency could take its place at the Federal Reserve's annual meeting in Jackson Hole, Wyoming. For example, Carney mentioned Facebook's Libra.

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