During congressional debates surrounding initial relief strategies to U.S. citizens and businesses as part of the CARES Act, significant conversation surrounded the introduction of a central, digital U.S. dollar—a federal-issued cryptocurrency for immediate allocation to taxpayers.
The creation of a U.S. digital currency carries radical implications for financial markets and the global economy. Beyond that, such a move yields an even greater impact on Bitcoin and the broader cryptocurrency industry.
Cryptocurrency and blockchain technology embodies a unique set of properties that enable a rapid response toolkit for governments in times of crisis. When disaster strikes—whether in the form of disease, war, famine, or otherwise—the rapid deployment of resources, workers, and capital plays the biggest role in suppressing the havoc spread by the crisis.
The digital dollar wouldn’t be the first example of a state-run cryptocurrency. In September 2017, the British Virgin Isles (BVI) were devastated by Hurricane Irma. The hurricane wiped out the country’s infrastructure, and as a result, officials were largely unable to allocate funds for clean-up and repair efforts.
Now, the BVI employs a state-run “Rapid Cash Response” digital currency fund. When the next disaster strikes, they’ll be able to order restoration services immediately, even if their physical banking infrastructure is affected.
These “crisis” constraints are also often seen throughout the daily lives of over a billion unbanked or underbanked individuals worldwide. For these folks, inadequate access to banks and credit is the everyday norm. The digital dollar aids those on the fringe, connecting all citizens to the services like savings accounts and loans through their mobile devices.
In times of increasing uncertainty and economic turmoil, more and more individuals are looking to cryptocurrency as a hedge against market collapse and a mechanism to protect savings.
Bitcoin is often referred to as “digital gold,” a nickname that symbolizes an ideological role akin to its physical counterpart. Historically, gold has been a consistent hedge against local currencies and financial markets. In anticipation of a major recession, individuals can protect their portfolios with an appropriate investment in bitcoin.
But the role of cryptocurrency goes even further. The worldwide, trustless, sovereign nature of bitcoin and other digital currencies paints the asset class as the perfect protection against seizure or otherwise dissolution represented by a worst-case scenario of government failure and economic shutdown.
The primary criticism against bitcoin and cryptocurrency, in general, is its lack of actual real-world use and value. Should governments elect to embrace cryptocurrency in their fiscal policies (and across the board, it appears that they are), this criticism is irrefutably moot.
It remains uncertain if the full effects of COVID-19 on the global economy have been observed. If the worst is yet to come, as some experts suggest, the pressure on governments worldwide to adopt more innovative and efficient approaches will further grow.
And in the same vein, individuals similarly have greater pressure to look to crypto, as their financial standing and investments are placed into jeopardy. With governments leaning more toward digital currencies, and individuals more inclined to take it seriously, bitcoin and the broader cryptocurrency market is in a unique position for an unprecedented explosion.
Beyond the financial impact, the incorporation of digital currencies by governments carries a widespread effect on the permanent adoption of cryptocurrency as part of a modern, digital standard.
At its core, blockchain technology represents a unique digital infrastructure for the nuanced communication of data and currency. This technology enables new and improved interactions for individuals and enterprises across industries throughout.
While a number of products and services have been created to capture these new and improved use cases, few projects have successfully packaged these developments into an accessible and user-friendly environment. Beyond the tech-savvy, the use of cryptocurrency is largely infeasible.
State-run digital currencies will represent a digestible and more easily approached medium for citizens at every level of tech literacy to meaningfully interact with and use cryptocurrency.
This adoption represents the foundation for the crypto-standard of tomorrow’s digital economy. Once individuals across the board are capable of interacting with digital currencies, the envisioned mass adoption becomes a much more attainable reality.