“Full Reserve Banking, Narrowbanks For Digital Currency, And The China Model”

On May 26, Jeremy Allaire will be hosting a discussion on YouTube Live with Michael Kumhof (Bank of England), Tommaso Mancini-Grinffoli (IMF), and Dr. Chuanwei David Zou (Wanxiang, PBOC).

The video interview will discuss the concept of, “Full reserve money, the implications of a digital currency and the future of the international monetary system.” 

The talk comes at an auspicious time. The Federal Reserve has printed trillions this year. The Bank of England just refused Venezuala access to its gold reserves; and China may soon release its digital Yuan.

Bank of England and Venezuela

The Bank of England holds approximately 400,000 bars of gold in its vaults, worth over £200 billion ($244.6 billion). According to CNN, this makes “It the second-largest keeper of gold in the world after the New York Federal Reserve.” 

Due to the coronavirus pandemic, Venezuela tried to access its €930 million ($1 billion) worth of gold that is held on its behalf. The Bank of England has “refused to confirm” that it will give Venezuela access to its gold. As a result, Venezuela’s Central Bank is suing the Bank of England.

As reported by CNN, “Venezuela had asked the Bank of England liquidate the gold and send the funds to the United Nations Development Programme so that the UN agency could procure “healthcare equipment, medicines, and basic foodstuffs.”

China’s digital dollar

It is expected that China may soon release its digital dollar. The digital currency has already been pilot tested in Shenzhen, Suzhou, Xiongan, and Chengdu. So far, the official launch date for the Chinese digital dollar remains unknown.

With the world looking to see what China does next, reports have come in that “Chinese digital dollar scams” have surfaced. Today, Cointelegraph revealed that a token impersonating the Chinese Digital Yuan tried to scam investors and lure them in.

Stephen O’Neal from Cointelegraph says, “Apart from flashy celebrity endorsement, “the e-Yuan” company is advertising a ‘promotion deal’ and promises high returns. It also has various social media app links at the top and bottom of the page, none of which are clickable.”

Billionaire economist Ray Dalio

Yesterday, the billionaire economist Ray Dalio published an article titled, “The Big Cycles Over The Last 500 Years.” Dalio’s article analyzes the rises and declines of the Dutch, British, and American empires—their reserve currencies, hinting that China is about to overtake the U.S.

The chart pictured above, shows that the world is undergoing a major shift in power, with the U.S. on the decline and China on the rise. According to Dalio, the chart plays out “Eight measures of strength—education, innovation and technology, competitiveness, military, trade, output, financial center, and reserve status—that we capture in the aggregate charts. It shows the average of each of these measures of strength, with most of the weight on the most recent three reserve countries (the US, the UK, and the Dutch).”

Final thoughts

Right now, the world is experiencing unprecedented changes. The Federal Reserve printed trillions. The Bank of England refused the Central Bank of Venezuela the right to withdraw their gold, which is held in trust. Ray Dalio predicts that China may soon overtake the U.S. as the world’s new superpower.

And, with the digital Yuan on the horizon, it will be interesting to see what happens next. Here are some big questions to think about:

  • There are significant changes happening in the world right now. How will this impact the price of bitcoin?
  • If banks can stop a nation from withdrawing gold held in trust, can they stop their citizens from withdrawing cash? Could this drive crypto adoption?
  • What does the future of the international monetary system look like? If something does change, who will the winners and losers be?

Philip Bonello, Director of Research at Grayscale Investments says, “The number of bitcoin investors appears to be doubling about every year and if we assume 1-2% of the world uses bitcoin which is reasonable based on a number of metrics, we could reach a tipping point (10%) in 3 years. Given the current inflationary environment, we may even see this growth accelerate.”

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