Bank Of England Challenges Dollar’s Dominance, Says It Could Be Replaced By Digital Currency Like Facebook’s Libra

Kevin Mwanza
Written by Kevin Mwanza
Bank of England
The Bank of England governor, Mark Carney, has suggested that a virtual reserve currency could substitute the dollar in international transactions. By Autumn Keiko

Mark Carney, governor of the Bank of England, said the dollar was “too dominant” and could be replaced by a new digital currency that will enable the global economy to recover from a savings glut.

Carney said a virtual reserve currency – a Libra-like currency based on several widely-used digital currencies and backed by a large group of countries – would be a better option in substituting the dollar in international transactions, Bloomberg reported.

This would unlock dollar funds that governments currently hoard as an insurance policy in uncertain times, according to The Guardian.

“The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new (digital currency) and it displaced the dollar’s dominance in credit markets,” the Bank of England governor said at the Economic Policy Symposium on Aug. 23 in Jackson Hole, Wyoming.

“By reducing the influence of the U.S. on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies.”

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The U.S. accounts for a tenth of global trade but half of trade invoices and two-thirds of global securities issuance, Carney said. Movements in the U.S. dollar are therefore fundamentally important to other economies.

A good example of a digital currency that could replace the dollar is Libra, Facebook’s in-the-works cryptocurrency, according to Carney. The cryptocurrency is supposed to launch in the first half of 2020, but only if the U.S. Treasury allows it.