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Leaked DOGE plans for Bitcoin, and Federal Reserve Chairman Jerome Powell's surprise announcement this week approving of banks and Wall Street ramping up crypto's adoption so long as they and their clients "can understand and service the risks" has analysts talking about crypto's glorious future.
The White House's obsession with Bitcoin is part spectacle, part playing to his Silicon Valley tech backers like Elon Musk and Peter Thiel, and has more to do with the libertarian-minded ideology surrounding the deregulation of digital finance than international financial or trade policy, Ashraf Patel, a research associate at South Africa's Institute for Global Dialogue, says.
“Fundamentally,” the observer argues, “crypto cannot replace fiat currency,” since “global trade finance investment will always need central banks,” whose chief digital instruments will lie in central bank digital currencies (CBDCs), not cryptocurrencies.
“It's actually CBDCs that are linked to currencies, that are introducing digital currencies and that would be the mainstay of going forward,” Patel says, pointing to calls from powerful corners for growing collaboration among countries to develop interoperability standards around the new “money.”
“Central banks are adopting digital currencies and they will continue to innovate. So they are the lead organizations on global trade in the tech side of it. Crypto would just be a sub market in the long term,” the researcher believes.
“There's a lot of hype behind [crypto] and investors are backing it, especially Silicon Valley investors. But I think at the end of the day, if it crashes they are not going to kind of bail out the consumers. Only government can bail out consumers. So it's a policy regulatory issue more than anything else,” Patel says.
“The problem in the US, even during the Biden administration has been the growth of crypto exchanges and all the corruption around it,” Patel added, highlighting the high-profile cases of the collapse of crypto exchanges.
Crypto Can't Fix US Economy's Deep Problems
“The number one problem” facing the US is the imbalanced trade relationships it has with its major partners, which have triggered deindustrialization and major job losses amid fierce competition from the Global South, Patel says.
Tariffs are a “short-term solution” to this problem at best, according to the observer, and one that will “not necessary lead to industrial development.”
Joe Biden’s so-called Inflation Reduction Act “mega industrial policy has had mixed results,” Patel recalled. Therefore, Trump “has to first fix domestic industrial policy, innovations, and regulation. That is the only way they can compete with the East…and not tariffs.”
As for crypto’s role in all this, it remains “one part and a very small part of international trade,” and therefore can’t play the economic and trade miracle cure the Trump administration may be hoping for.
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