US Dollar Dominance Threatened by Cryptocurrency Dollarization
Cryptocurrency dollarization is becoming an increasingly significant phenomenon in the United States. According to Mikhail Melnik, an economics professor at Kennesaw State University in Georgia, the rise of digital assets is challenging the position of the US dollar. The growth of transactions in cryptocurrencies such as Bitcoin and stablecoins like USDT, USDC, BUSD, and DAI has led some experts to suggest that the dollar's dominance may be undermined.
The increasing use of digital assets for everyday financial infrastructure has led to a reduction in the space for monetary policy tools. This shift is not unique to the US, as countries with high inflation and currency restrictions such as Argentina, Venezuela, Turkey, and Nigeria have also seen an increased demand for dollar-denominated crypto assets.
Mikhail Melnik predicts that within three to five years, the volume of cryptocurrency transactions in the US could grow to a level comparable to 5-10% of the country's gross domestic product. This would pose significant challenges for domestic monetary policy and potentially undermine the international role of the dollar.