JPMorgan Chase, the largest bank in America, has publicly stated that the US dollar will struggle to hold its position as the world’s dominant currency in the coming decades. According to the banking behemoth, the US dollar could be undermined due to “structural reasons as well as cyclical impediments.”
This shift in power is already being observed globally with the rise of eastern economies and the cryptocurrency market, with JPMorgan themselves launching JPM Coin, a stable coin pegged to the US dollar.
US Dollar No Longer the Dominant Currency?
In 2012, JPMorgan’s Michael Cembalest predicted that the US dollar would lose its status of the world’s reserve currency, blaming destructive monetary policies for the gradual decline. The US dollar has maintained its status as the most dominant currency for over a century, with foreign investors continuing to hold sizable USD reserves.
The dominance of the US dollar came with the establishment of the federal reserve system, which helped the US in having a nationally coordinated monetary policy, resulting in its high economic growth. However, since the end of WW2, this economic growth has shifted gradually over to Asia, with China turning into a prominent player almost overnight. China now matches the US in its share of global GDP, with this percentage said to grow in the future. China has transformed from being a manufacturer of cheap goods to a hub of up and coming technologies.
Other countries, meanwhile, have been experimenting with developing their own payment systems in lieu of USD. With cryptocurrency payments being accepted gradually over the world, cryptocurrencies like Bitcoin could become a dominant form of reserve in the future.
JPM Coin: JPMorgan’s Answer to Cryptocurrencies
JPMorgan’s CEO Jamie Dimon was well-known in the cryptocurrency community for slamming the asset class on multiple occasions. However, in January 2018, Dimon said that he regretted calling Bitcoin a fraud, and that he believed in the underlying technology’s potential.
JPMorgan then announced its own digital currency under the JPM Coin moniker. The coin will be backed by the bank’s “strong balance sheet”. For now, the company has announced that the coin will only be tested by a small number of JPMorgan’s institutional clients. The currency has reportedly been built on top of Quorum, an Ethereum based blockchain platform developed in association with Microsoft.
Umar Farooq, Head of blockchain at JPMorgan, said that JPM Coin would enable instant delivery of bonds. He further predicted that delivery of securities will become digital or tokenized in the future. For now, however, JPM Coin will simply be viewed as a stable coin, with each token equivalent to one US dollar.
Do you think cryptocurrencies, including Bitcoin and private offerings like JPM Coin, could dethrone the US dollar one day? Let us know your thoughts in the comments below.