Tokenization Could Both Bolster and Threaten dollar Dominance, French Central Banker Warns
Paris – Tokenization presents a complex dynamic for the U.S. dollar’s global standing, possibly reinforcing its dominance while together laying the groundwork for its decline, according to Agnès Bénassy-Quéré, Deputy Governor of the Banque de France. Bénassy-Quéré recently assessed the impact of tokenization, acknowledging a growing tension between the dollar’s continued hegemony and the emergence of a multipolar global economy.
While stablecoins currently appear to strengthen the dollar – offsetting a 4% decline in U.S. dollar central bank reserves since 2000 with a more than three-fold increase in dollar value through stablecoin investment in Treasuries – Bénassy-Quéré cautioned that “unsustainability of US fiscal policy and weaponization of the currency by the US governance could weaken the intrinsic appeal of the US dollar.” She attributes the dollar’s current resilience to notable inertia within the international monetary system and reinforcing factors stemming from its widespread use.
Bénassy-Quéré highlighted how the dollar’s dominance creates a self-perpetuating cycle, making it cheaper to use and encouraging further adoption.This is exemplified by the greater liquidity available when exchanging currencies against a single dominant currency versus multiple others, solidifying its role as a store of value, a medium of payment, and a unit of account.
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