Geopolitics and Monetary Systems

Abstract

A significant part of the world would like to get rid of dollar-based international settlements and is therefore looking for non-dollar alternatives. It is replacing dollar settlements with clearing systems. This is resulting in a spectacular division in international payment systems. Another division is the role of digital currencies. Technological advances have enabled the operation of high-capacity computers. This has made it possible to create digital national currencies. This is how cryptocurrencies and digital national currencies came into being. Cryptocurrencies embody legal value and are created using special distributed ledger technology. Their creation is called cryptocurrency mining. Anyone who is technically capable can do it. National currencies are monopolies; only the central bank and the banking system can create them. Accepting cryptocurrencies in the payment system is risky because their value is volatile. Stablecoins are pegged to the dollar, so their value is presumably stable. This is based on trust. US President Trump wants to base the future on these currencies produced by tech giants. In contrast, China was the first to create its digital national currency, the digital yuan. This process also divides the international settlement system. The EU is considering combining the two methods. There will be a digital euro, but there will also be stablecoins – albeit regulated ones. (China also allows yuanbased stablecoins.)