The de-dollarization: once upon a geopolitical concern called crypto

Race to the dollar: the evolution 

In order to understand why de-dollarization is happening, appreciating the value of the purchasing power of $100 over the years is necessary. Although it was agreed that the dollar would be the universal currency, most of the other countries raised eyebrows on how it gives so much power to the US. Even more when Nixon cut the gold and the dollar link in the 70s  - currencies and exchange rates were to be decided by markets but for some reasons  governments kept on interfering with the value through printing …

What has been seen cannot be unseen: noticing the troubles 

Fast forward to nowadays and not many people are aware that our general money is not backed by gold. Even though the reserve requirement was established after the 2008 financial crisis this decree was bypassed by the current pandemic in 2020 allowing banks to not have all the required money in reserve.

Putting it simply, the money showing on your bank account online statement may not actually really be there… 

There is a saying in French stating that some people only see up to their own noses and that has been the case for us the privileged ones in the US, Europe and even some of the Asian countries. The reason is because our financial system seems ok. We don't look elsewhere even with taxes and bank fees. At the moment we say that we can afford our daily lives and it does not seem to penalise us. 

However, the COVID-19 sanitary crisis showed much more than our government's differences, it showed that the gap between rich and poor kept on being dug.  

It was always at the back of our heads that “why am I paying so much in bank fees and to send money to my family abroad?” I personally remembered that the remittance fees had to be counted in my budget as it could be up to 25% of the amount I was sending. 

Lockdowns allowed people to pause and start to think and realise that our financial system is slightly corrupted even in Europe or the US. The financial system is centralized therefore the power is given to the institutions. They can decide whether you can or cannot send money and how much you are to be charged. 

What about poorer countries that don’t have access to bank accounts or even have to travel 3 hours to the nearer city to get cash out. A lot of money is lost in this process and in 2017 it was found that over millions and millions of dollars have been spent on remittance - $466 billion exactly. It is clear that we are not in control of our finances as much as we think we are … 

The fact that trades are based on the US dollar gives to the US that huge “exorbitant privilege” ( Valerie Giscard d’Estaing) of ditching importation taxes. To put this in perspective France imported for a amount of €46.85 billion and this only in April (2021), imports are vital for countries and that is what gives the US and its dollar a massive advantage. The dollar is enjoying its privilege and even if most countries were unsure about it, it was accepted but where it went overboard was when the petrodollar was named.

The original aim by linking the US dollar to oil was to bring back the US dollar to the US however what happened was that these dollars were sent away - in financial exils. Missing dollars and the creation of a new currency (Euro) brought pressure to that dollar and coincidentally, the Iraq war started - one of the important oil providers. Plus, according to the petrodollar, oil countries should be rich but this isn’t the case - Nigeria and Venezuela are oil countries but still suffer internally perpetuated through the petrodollar. 

Crypto brings power: releasing solutions 

No government is perfect that’s for sure however solutions can be drafted and usually comes from the population. That is why in 2009, somewhere in the world an individual or a group of individuals called Satoshi created the first cryptocurrency: Bitcoin. 

 The main difference between any other crypto assets and Bitcoin is the decentralization and true scarceness. The blockchain technology sustaining Bitcoin is peer-to-peer. It is the individuals in that network that valid transactions and allows the blockchain to be maintained. No intermediary is necessary. Everyone and anyone can send cryptocurrency everywhere in the world whether you send a few dollars to millions it will be processed the same way and at the same speed. There is no such a thing as priviledge or priority passes. 

This technology was running on a low profile up to 2012 and boomed around 2015/16. The Blockchain through Bitcoin can save economies is an understatement and El Salvador is the example Bitcoin Beach is a company established in El Zonte that has successfully created a parallel economy based on Bitcoin and allowed its inhabitants to keep their savings but also make money on top of it. A few days ago, the president of El Salvador announced that for every new wallet created, $30 would be offered to the owner. 

Similar initiative can be found in Brazil with Moeda, a company that focuses on local businesses to support them through cryptocurrencies by fundraising. They have created their own currency and economic system to reward and support their local businesses. Most of the people over there don’t have access to banking and cannot build their businesses, Moeda allows them to gather money to start their business - promoting good values and equal work opportunities. 

About work opportunities lies another plus that crypto created: the creation of jobs such as developer and advisors - Bitcoin Beach in El Salvador created many jobs for the youth giving them a better future. 

Nigeria mentioned earlier has also welcomed crypto in 2020, KoinKoin was launched from the UK to be the crypto exchange focusing on Nigerian population allowing sending and receiving money without being over charged. 

What could possibly be the link between Nigeria and Brazil ? 

The answer: South Korea, bitHolla to be precise. Both Nigeria and Brazil started their crypto exchange through the HollaEx Kit, a white-label crypto exchange software. This company based in Seoul has managed to develop an open-source software that allows anyone to deploy their own crypto exchange in less than an hour. Moeda even launched it live. 

This piece of technology shows that crypto is available for anyone, no fancy degree or material needed. Crypto is the population choice - no one can interfere in it. To say, the blockchain cannot be stopped, unless all the computers in the world crashed. 

Link to watch the launch: https://www.youtube.com/watch?v=kFImtNdPEY4 

While the dollar is going down, crypto is rising 

People are being controlled without having a say and suffering for it. About 120 out of 200 millions people are living under the poverty line in Nigeria even though it is considered a gold mine of oil. Millions of dollars are spent for remittances and millions of people don’t have access to banking. The dollar has for too long been the reference and indirectly the US also.

Of course, the US dollar is not the big baddie but the institutions really, unfortunately someone or something has to be blamed and that spotlight headed to the US dollar. 

Populations have grown to notice it and started to step away from this supremacy. Not longer than last week, Russia decided to trade in Euro for gas - giving the Euro a new preferred place and an attempt towards de-dollarization. 

That is therefore why the dollarization was a good idea at the beginning. Having one currency would make the trade easier but when in threat it is used against the population and used as a hidden pretext to war then of course changes are bound to happen. 

The de-dollarization is happening and crypto is on the rise, governments are worried about losing control therefore started to dig into crypto. Introducing the digital currencies also called CBDC: Central Banks Digital Currency are crypto currency designed to be the representation of a fiat currency in the digital world. Here is an article about the digital dollar Tether and here's another about the Middle East situation on CBCD. Many researches have to be conducted on CBDC and only the future would tell its mass adoption and impact on the financial system.  

Bear in mind that even if nowadays the dollar supremacy and its so called exorbitant privilege seem to be a dent in the financial system it was once upon a time a savior. The original aim to nominate the US dollar as the number one currency was to facilitate trades and help the development of certain countries. That is why things have to be put back into their times to understand the impact of the economy on people. 

Thus, 2021 is the crypto year.