Kenneth Rogoff, former chief economist of the International Monetary Fund (IMF), points out in his new book 'Our Dollar, Your Problem' that the dollar's dominant position in the global underground financial system is being infiltrated by cryptocurrencies.
Rogoff views the underground economy as "one of the most important markets for the dollar" and directly states that the dollar's global status is declining, with its edges wavering.
Underground Economy: The Invisible Battlefield of Cryptocurrencies
In an interview with Bloomberg, Rogoff noted that although the dollar has enjoyed "excessive privileges" since World War II, its position is being eroded by factors such as the increasing influence of the yuan and euro, and escalating geopolitical tensions. In this context, cryptocurrencies, especially in the global underground economy crucial to dollar liquidity, are playing an increasingly important role.
The Outline of Underground Economy and Value Positioning of Cryptocurrencies
Rogoff's "underground economy" primarily refers to tax evasion (with an average tax evasion rate of 15-20% in advanced economies, and potentially up to one-third of GDP in developing economies) and illegal economic activities such as arms trade and human trafficking.
According to Rogoff's research and World Bank documents, its scale is about 20% of global GDP, reaching $20 to $25 trillion, with the dollar previously being the primary medium. However, cryptocurrencies like Bitcoin have now significantly infiltrated, used for transactions and sanction evasion.
Double Warning to the United States: Economic Pressure and National Security Challenges
Rogoff analyzes that the expansion of cryptocurrencies in the underground economy poses dual economic and national security impacts on the United States. Economically, with decreased dollar demand in the underground economy, Rogoff believes this could push up domestic interest rates, affecting costs of national debt, mortgages, car loans, and student loans, increasing the burden on people's livelihoods.
In terms of national security, the characteristics of cryptocurrencies make it difficult for regulatory agencies to track illegal funds, combat crime, and enforce sanctions. The report indicates that between 2022 and 2023, stablecoins were used to handle over $40 billion in illegal transactions evading sanctions. While the FBI and CIA have used blockchain analysis for tracking, this also reflects the erosion of the dollar's financial monitoring monopoly.
Additionally, dissatisfaction in some global regions with the United States' excessive control of the financial system has intensified this challenge, prompting asset shifts from the dollar market to other trading tools.
Value Consensus of Cryptocurrencies
Meanwhile, Rogoff also refutes claims that cryptocurrencies lack fundamental value:
If the underground economy represents 20% of global GDP, then cryptocurrencies will become an economic entity worth $20-25 trillion. If you provide a means of exchange, that is a value proposition. Crypto has value. It is used for transactions.
Even with strict regulation, governments would find it difficult to control a significant part of the economy. So it is not without value.
