Cryptocurrency competition should be welcomed by Congress

The notion that banning cryptocurrencies will help the dollar retain its standing as the world's reserve currency is incorrect.

Congress should focus on strengthening what the dollar can give rather than entrenching the dollar at the expense of emerging money inventions.

Currency Choice

Many members of Congress are afraid that the dollar's position may be eroded if digital currencies gain traction. "As digital assets become more popular in the global economy... how can we assure the dollar stays the [world's] reserve currency?" questioned Representative Blaine Leutkemeyer (RMO) just yesterday.

"The US dollar can't take its supremacy for granted," Brian Brooks said, "and we need to start thinking about competing on [utility.]" Rather than constraining the market, the solution is to improve the dollar, and cryptocurrencies already provide insight into how that may be accomplished.

Although cryptocurrencies are not widely recognized as a means of transaction, their limited use implies that Americans demand more financial privacy. When the FDIC last polled the unbanked, concerns about financial privacy were two of the top three reasons they said they didn't have a bank account. Improving the present currency and banking system by repealing the Bank Secrecy Act and providing better financial privacy rights would be a significant step toward strengthening the dollar's global standing.

More importantly, cryptocurrencies may provide an incentive to maintain the dollar's strength, so ensuring the dollar's long-term viability. The government will have a greater motivation to avoid inflation in the first place if the American people have the option of choosing an alternative in the event of inflation. Countries that have dollarized (both officially and unofficially) are clear examples of how effective monetary and financial alternatives can be in reining in a reckless government's spending: officials in Ecuador and Zimbabwe had to face this reality when they lost control of their domestic currency after citizens switched to a more stable alternative.

Cryptocurrencies are an Ally to the Dollar

Finally, during yesterday's Congressional session, George Selgin tweeted, "It can't be repeated enough: promoting the creation of USD stablecoins would strengthen the dollar's worldwide reputation." "What I find striking is that the leading stablecoin issuers have chosen to peg their stablecoins to the dollar, which strikes me as a vote of confidence that reinforces, rather than challenges, the dollar's status as the world's reserve currency," Representative Ritchie Torres (DNY) said during the hearing.

If given the opportunity to thrive, cryptocurrencies might provide a much-needed degree of competition, encouraging the dollar to develop and strengthen its position. The only thing standing in the way is the erroneous idea that banning cryptocurrencies will assist maintain the dollar's role as the world's reserve currency.