Cryptocurrency Dollarization Threatens US Monetary Policy

Cryptocurrency dollarization in the US is becoming a growing concern for economists and policymakers. According to Mikhail Melnik, professor of economics at Kennesaw State University in Georgia, the rise of digital assets like Bitcoin and stablecoins like USDT, USDC, BUSD, and DAI poses a threat to the dollar's position.

The growth of settlements in digital assets is similar to classic dollarization seen in other countries, where an alternative currency replaces the local currency. In this case, cryptocurrencies are acting as alternative currencies within the US financial system. Market participants like investment structures and payment platforms are adapting to the crypto market, making it increasingly difficult for authorities to manage monetary policy.

Mikhail Melnik predicts that within three to five years, the volume of cryptocurrency transactions in the US could grow to 5-10% of the country's gross domestic product. This would limit the ability of the US authorities to influence the economy through monetary policy tools and may lead to additional inflation.