- Bitcoin could be included in a global reserve currency basket that will complement the dollar (USD).
- Lack of alternatives will keep the USD strong in its position as a global reserve currency, according to the former PM of Canada.
In an interview for the financial services firm Cambridge House, former Prime Minister of Canada Stephen Harper spoke about the role of the dollar as a reserve currency, the introduction of CBDCs, and the global economic situation. Harper said that Bitcoin could be part of a basket of reserve currencies that are adopted in the future.
The interview was conducted within an online event called the “Vancouver Resource Investment Conference” organized by the financial services firm. Harper clarified that he does not consider himself an expert on cryptocurrencies or digital assets, but his opinion is that the adoption of central bank digital currencies (CBDC) is inevitable.
In this regard, the former head of government of Canada expressed concern about the monetary policy being implemented by the US. Federal Reserve and other major global institutions to mitigate the crisis caused by the Covid-19 pandemic. Moving away from their role as custodians of the value of their national currency, Harper believes that central banks are becoming “general bankers”.
This position is “risky” and could lead to two scenarios: the evolution of the banking sector by issuing CBDCs or a series of experiments that, if mishandled, worry Harper. In that sense, there will be governments that will hit a wall of inflation, devaluation, or austerity as a result of poor management of the crisis.
As in 2008 and 2009, the financial crisis could have its epicenter in the United States. At that time, Harper stated that the Canadian and Australian dollars and other currencies from strong economies received an increase in demand.
Therefore, there could be a change in the status of the dollar as the main reserve currency of the world, but not an absolute displacement unless the crisis in the United States becomes a “catastrophe”, as Harper stated:
Other than gold, Bitcoin, a whole basket of things, I think you’ll see the number of things that people use as reserves will expand, but the U.S. dollar will still be the bulk of it.
Crisis of the dollar will favor Bitcoin
The strength of the dollar comes from the lack of alternatives to occupy the role of a global reserve currency, Harper explained. The euro and the yuan could be alternatives, but it seems unlikely because of the uncertainty surrounding the future of the European alliance, according to Harper, and because of the lack of confidence in the assets that support China’s currency.
Notwithstanding the above, the former head of the Canadian government later added that he considers it difficult for “private” cryptocurrencies, as he classified Bitcoin,” to be a large-scale store of value that fulfills the three functions of money as a medium of exchange, unit of account and store of value. Harper believes that Bitcoin could fulfill some, but not all of these functions:
As an investor, I have no idea what this investment (Bitcoin) represents. When I have a traditional currency or, for that matter, a government instrument of any kind, I have the promise of the government supported by its power of taxation. But I don’t know, as a store of value, what I have if I hold Bitcoin.