“There is no country with more to lose from the disruptive potential of digital currency than the United States.”
So goes the stark warning from analysts at the US’s largest bank, JPMorgan Chase, in a new report, according to a Cointelegraph.
The report’s authors – among them, JPMorgan’s head of of US interest-rate derivatives strategy Josh Younger and chief US economist Michael Feroli – wrote: “This revolves primarily around US dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services conveys immense advantages.”
While the analysts do not anticipate the dollar losing its status as global reserve currency anytime soon, they pointed to some of the weaker links in the currency’s dominance – including in trade settlement and the SWIFT messaging system.
SWIFT was notably a key lever in imposing sanctions on the Iranian regime, falling into line with the US administration and suspending access for Iranian banks back in 2018. This caused tension with the European bloc, where finance ministers had attempted – and ultimately failed – to exempt the cross-border payments network from the restrictions. Some contend the SWIFT suspension violated European Union laws.
Were countries able to circumvent SWIFT, JPMorgan notes, the United States would find itself less able to achieve its geopolitical strategic goals, which in part relies upon the greenback’s global dominance.
For the US, in particular, the bank underscored that “digital currency is an exercise in geopolitical risk management.”
Managing this risk would not necessarily preclude a digital currency component, however. The analysts said: “Offering a cross-border payments solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy.”