Digital Currencies Pose Critical Risks to Dollar Dominance and SWIFT: JPMorgan Analysts

Analysts at JPMorgan warn that the emergence of digital currencies may dampen the dominance of the US dollar and SWIFT.

As the world’s reserve currency, the dollar gives the United States geopolitical power and easy access to capital, enabling the country to maintain its status as the world’s leading economy and political power.

Analysts at JPMorgan, including Josh Younger, head of the US interest rate derivatives strategy, and Michael Feroli, head of the US economist, write in their report as quoted in Bloomberg,

“There is no country that has more to lose from the disruptive potential of digital currencies than the United States. This is mainly about the hegemony of the US dollar. Issuing the global reserve currency and medium of exchange for international trade in raw materials, goods and services brings enormous benefits. ”

With SWIFT (Society for Worldwide Interbank Financial Telecommunication) facilitating global and local financial flows through its messaging system and the dollar serving as the world reserve currency, analysts indicate that the US will face difficulties in implementing sanctions and measures to finance terrorism.

The analysts also suggest that the US should invest in the development of a digital dollar to maintain its place in the global economy.

“Offering a solution for cross-border payments on top of a digital dollar, especially if designed to minimize the disruption of the structure of the domestic financial system, would be a very modest investment to protect an important means of power in the global economy to project. Especially for high-income countries and the United States, digital currency is an exercise in geopolitical risk management. ”

According to to Aditi Kumar and Eric Rosenbach from the Belfer Center at Harvard Kennedy School,

Most cross-border payments – nearly $ 5 trillion per day – are sent via SWIFT messages, and a significant portion are routed through U.S. correspondent banks. By sharing information with these institutions, US authorities can identify illegal activities, such as money laundering and terrorist financing

But perhaps more importantly, this system gives the United States a huge influence over other states, as sanctions that cut a country off this network are usually a death sentence. ‘

China and other countries are urging to develop and test national digital currencies that can use ledger ledger technology, creating innovative global payment platforms designed to match the status quo.

While the JPMorgan report concludes that the U.S. dollar is not likely to be replaced as the world’s reserve currency, Bloomberg reports, emerging digital currencies are more likely to get rid of SWIFT and the legacy systems that handle trade deals.

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