Slow moving trains carry more weight and are harder to stop…
This article should come with a warning for my Bitcoin Buddies: You are not going to like this article. That said, let’s get right into it…
How Can Bitcoin Displace the US Financial Hegemony?
It can’t.
The United States of America controls all seafaring trade. The only other blue ocean navies are Japan and the United Kingdom. These combined navies are without match on the seas.
The US Treasury bond market is the largest, most trusted, and liquid market ever created – and it supports all global trade. The US Dollar is the most trusted financial barer instrument ever created.
That’s why it’s hard for me to imagine how Bitcoin, Gold, any fiat currency or some other navy is going to displace the US financial hegemony. A day doesn’t go by where someone is declaring the dollar dead – its pure nonsense and nothing more than silly click bait.
Adoption of Blockchain Technologies into a Global Banking System
Let’s have a serious review of how the US Treasury and Federal Reserve will adopt blockchain technologies into a worldwide banking system to secure the US financial hegemony:
My Advice: Banks should have a wait-and-see strategy to blockchain technologies and investments. The US Treasury has a vested interest and will likely supersede any bank level implementations.
- The Federal Reserve will establish a trusted and secure blockchain ecosystem like Ethereum for all banks.
- US treasuries will become the ultimate “stablecoin” digital asset for the new ecosystem.
- Finally, the US Treasury will issue a digital dollar currency for the Federal Reserve to manage.
This decentralized federal reserve and treasury market system will remove all borders. In other words, there will be one central (DeFi) bank.
As is the case with everything in the world of cryptocurrency, DeFi does not have geographical limitations.
Anyone with access to the Internet and crypto wallets can theoretically interact with the US financial system. No closed system (i.e. China, North Korea) will survive.
Busting Down Borders: Decentralization Will Offer…
- Faster speed. A lack of intermediaries and borders, combined with the superior speed of the blockchain technology, will result in faster transactions and overall easier access to the services. I’m still waiting for FedNow to roll out. The problems with the old systems are many: they’re too slow, insecure, isolated, and expensive.
- Improved transparency. There will be both public and private layers to the new decentralized federal reserve system. Anyone within those private/public access rings will have complete transparency between all parties.
Consider public markets where everything is transparent to everybody, along with private markets where everything is transparent to selected participants (e.g. banks and governments). - Programmability. The flexibility of smart contracts can result in superior automated solutions, which in turn can be used to create new assets and financial tools.
- Interoperability. Another result of the system’s flexibility, this means that it is easier to make protocols and dApps to integrate and complement each other at a deeper level than that possible in the world of traditional finance solutions and services.
- Immutability. A decentralized federal reserve system based on cryptography and data protection using blockchain technology is pretty much immutable, which increases security and trust from the ground up.
And last but certainly not least: more control. In an odd paradox, the Federal Reserve is giving up control over transactional aspects of the system while at the same time gaining control of the whole system.
Blockchain Innovation & Implementation Will Be Retained By the Federal Reserve
What will the impact on banks look like? Here are three key points of interest:
- Consider payments, lending, and asset tokenization capabilities to be rolled out by the Federal Reserve.
- Any competing FinTech will likely be kept out of the system or adopted by the system.
- Some blockchain innovations from the marketplace will be allowed such as KYC and fraud.
This will take at least seven years (till 2030) for the Federal Reserve to fully roll out a decentralized system.
Know this: the transformation will be profound at every level of today’s financial systems.
How prepared is your organization?
Deciphering the elements that work collectively towards progress – and building a roadmap for successful execution – that’s what lights my fire. Reach out today to find out how I can help transform your organization for the big changes that lie ahead.