The BRICS currency will not kill the Dollar - Understanding why as PayPal launches a stablecoin

Stablecoins are effectively derivatives of whatever the underlying currency for stability is, it is very ironic that this is what may actually save the usd from extinction.

Too Big To Fail

I do not believe for a second that anything is too big to fail, it is not how big a company is that ensures stability or continued functionality, rather, the health of a company is largely reliant on the management and nothing less.

Understanding this, not even the USD is too big to fail, it is not and could potentially fall in very drastic economic activities and one of such is the plans of the BRICS to launch their own unified currency for international trade.

I believe that by now the majority of us are aware of the Chinese play to win world power, trade happens to be the path they intend to leverage to achieve this, after all, money is the greatest ingredient of power. As such, being amongst the countries joining heads to ditch the USD and all that, the Chinese would be in certain advantageous positions to displace the United States with time, emphasis on "time".

Stablecoins(crypto) will save the USD

it is important to note that the USD is largely dominating the global trade markets, about 58% of global reserves are in USD, and as if that were not enough or impressive, about 88% of international transactions are settled in the USD.

Now, of course, countries can quite easily decide to ditch the USD as their reserve currency at any time for whatever reason, but what happens with the dominated share in transaction settlement currency?

The domination the USD has as a unit of account is incredible, this is particularly one of the major reasons it is so powerful because for starters, money is largely virtual and mostly volatile on a global scale.

The United States has positioned itself as a reliable economy for measuring value markets against, thus the application of USD in transactions value measurement despite it not always being the actual settlement currency, but then again, it is still largely the dominative settlement currency and will likely remain so due to the expansion of cryptocurrencies.

Did you know that the majority of the cryptocurrencies in the market are largely pushing more value unto the USD?

What is the dominative unit of account within the cryptocurrency ecosystem? What is also the ultimate settlement currency?

One of the key things cryptocurrencies solve is limitations in cross-border payments or transactions which in-turn limits the flow of value across world economies.

With that being solved, many global economies are exposed to attaining easy value flow from across the world, so having it in mind that each of these assets are effectively promoting the USD, the vast majority of this ecosystem is making the USD stronger by settling transactions in a derivative of it, effectively increasing USD dominance as a reserve currency and receiving parties globally now hold USD derivatives.

PayPal is the latest company to announce a stablecoin launch and the announcement reads:

"PayPal USD (PYUSD) is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, and can be redeemed 1:1 for U.S. dollars."

So as a holder, you're effectively holding US debts, just as when you hold many other stablecoins and even any cryptocurrency in a way.

It is important to note that there are speculations that the BRICS currency will be gold-backed. I cannot think of a far worse limitation for a currency right now, so therefore I don't believe the dollar will be dead on these hands.

Posted Using LeoFinance Alpha