The Global Currency Reset: What is the future of a Global Currency
The Global Currency Reset: What is the future of a Global Currency
David Bonellie Last updated: February 21, 2024
The Global Currency Reset: What is the future of a Global Currency
The Global Currency Reset (GCR) typically refers to a hypothetical event in which the world’s currencies are supposedly “reset”. The GCR looks at new values based on the revaluation of specific currencies and the devaluation of others. Proponents of the GCR theory argue that this reset is necessary to address the current flaws in the global financial system. A GCR can level the playing field for developing nations.
There are several impacts that global currency changes can have on individuals and their businesses, global mobility, and investing.
Brief History of Fiat Currency (Modern Money)
Fiat currency is not backed by a physical commodity such as gold or silver but is based on confidence and trust in the issuing government or central bank.
Bretton Woods Gold Standard
The Bretton Woods Agreement of 1944 established the US dollar as the world’s reserve currency and pegged it to the value of gold, providing a fixed exchange rate system. After World War II, governments sought to manage their economies and stabilize their currencies.
The agreement required countries to guarantee the convertibility of their currencies into US dollars to within 1% of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks.
Move to the PetroDollar
This type of fiat policy lasted until 1971, when the US government ended the gold standard. The move away from the gold standard was another “global currency reset” at the time and has existed for the last fifty years.
Shortly after 1971, the term “petrodollar” refers to the system that emerged whereby oil-exporting countries agreed to price their oil exports in US dollars. The petrodollar allowed the US to maintain its dominance in the global financial system and helped to support the value of the US dollar.
Several currencies are pegged to the US dollar, a common strategy in the Caribbean and several of the citizenship by investment countries. The East Caribbean Dollar is the primary currency across all five CBI countries, and investors can settle their financial investment requirements in US dollars to obtain citizenship.
Turkey’s citizenship by investment programs pricing is in US dollars. Although in this instance, investors need to convert their US dollar into Turkish Lira.
The Global Currency Reset
Potential Benefits and Challenges of a Global Currency Reset
Proponents of a global currency reset (GCR) argue that there could be several benefits to a global currency reset. Some hope that a GCR will help to reduce the disparity in wealth and income between countries and promote greater financial fairness by reducing the dominance of a single country’s Currency in the global financial system.
A currency reset moves away from a monetary system focused on short-term profits and speculation. Additionally, a GCR could promote a more efficient allocation of resources and investment in long-term development.
In this regard, the global currency reset reduces geopolitical tensions by reducing the dominance of a single country’s Currency in international trade and finance and could promote greater cooperation and stability in global economic relations.
Proposed Models for a Global Currency Reset
As there is no official movement or proposals on a currency reset, it is challenging to nail down one model that can be adopted. That being said, here are four potential options for a global currency reset.
A Global Reserve Currency
Under this model, a single global reserve currency would replace the current system, in which the US dollar is the dominant reserve currency. This global Currency could be backed by a basket of commodities or other currencies and managed by an international body such as the International Monetary Fund (IMF).
Regional Currencies
Another model for a GCR would involve the creation of regional currencies within specific geographic areas. For example, the Euro is a regional currency used within the European Union. Under this model, several regional currencies could replace the US dollar as the dominant global Currency.
Blockchain-Based Currencies
Some proponents of a GCR have suggested that a blockchain-based cryptocurrency is ideal for replacing the current system. This Currency would be based on decentralized ledger technology and managed by a distributed network of computers rather than a central authority. It is possible that Bitcoin or Ethereum be the global settlement cryptocurrency in the future.
There are a few citizenship by investment nations that are forward looking with regards to a GCR. Antigua and Barbuda’s Digital Assets Business Bill and Saint Kitts and Nevis Virtual Assets Bill are two pieces of legislation that allow registration of businesses interacting with cryptocurrencies. One step closer to allowing investors to pay for citizenship directly with crypto in the future.
Central Bank Digital Currency (CBDC)
Similar to a blockchain-based currency, A CBDC is a digital version of a country’s fiat currency issued and backed by the central bank of that country. It operates on a centralized ledger and is subject to the central bank’s monetary policy. The purpose of a CBDC is to provide a secure and efficient means of payment while also providing greater transparency and control over the monetary system.
Central Digital Bank Currencies (CBDC) or Cryptocurrency in the Global Currency Reset
One of the biggest global currency resets will be a central bank digital currency or cryptocurrency. Governments favor a CBDC because of their ability to control and have absolute visibility. Cryptocurrency and peer-to-peer transactions do not offer the government such control.
Is a Central Digital Bank Currency (CBDC) a Cryptocurrency without Privacy?
Governments are investigating the use of CBDC for a variety of reasons. One of the primary motivations is to increase financial inclusion. CBDCs could provide access to financial services for people who do not have access to traditional banking systems.
By providing a digital payment system that does not require a bank account, CBDCs could help to reduce the number of unbanked individuals. Another potential benefit of CBDCs is improving payment system efficiency and leading to faster and more cost-effective transactions.
CBDCs could also provide central banks with additional tools for implementing monetary policy. For example, a CBDC could have negative interest rates, stimulating economic growth during periods of economic downturn. Governments using a CBDC can offer greater protection to consumers against f***d and theft. All transactions are available on a secure, tamper-proof ledger.
A CBDC will require its users to complete a KYC before being able to transact. There is the potential for privacy and encryption technology, but governments will unlikely align this way.
Global Cooperation of a CBDC as the Currency Reset
If Nigeria’s CBDC is anything to go by, there will be severe pushback from a large portion of the population. The opposing viewpoint from Nigerian citizens is the manner of design of the Currency, the lack of trust in the government and central bank, and the perceived benefits and drawbacks of the system.
A CBDC raises privacy concerns using a centralized ledger to record all transactions. The CBDC would give the government or central bank issuing the CBDC a high degree of visibility into individuals’ financial activities. Although a global currency reset and CBDCs can include zero-knowledge privacy, there will be doubt among potential users.
Alternatively, countries like El Salvador adopted Bitcoin as a legal tender and the use of StableCoins as transaction currencies. A stablecoin is pegged to the US dollar but is a cryptocurrency, allowing users to transact anonymously. Previously bankless citizens now being able to engage in financial transactions with relative ease.
Implications for Investors and Businesses
If privacy is not a concern for businesses and investors, a global currency reset can offer several benefits for business transactions.
Faster and more efficient payments;
Lower transaction costs;
Improved security and f***d protection; and
Increased access to financial services.
Impact on Citizenship by Investment and Golden Visa Programs
One advantage of using a CBDC for citizenship by investment is a easier and faster option for investors to transfer funds. CBDC investors can move their investment funds more quickly and securely than with traditional payment methods.
Additionally, because the details of all transactions are on a secure, tamper-proof ledger, it may be easier for governments to track and verify investment transactions. Seeing each transaction could help to prevent f***d and ensure compliance with citizenship by investment program requirements.
Source: Global Residence Index