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Digital currencies could threaten US geopolitical power, JPMorgan warns

May 22, 2020

“There is no country that has more of the disruptive potential of digital currencies to lose than the United States.“”

Analysts from the largest US bank JPMorgan Chase warned in a new report by Bloomberg News on May 22.

The report’s authors – including JPMorgan’s chief of the US interest rate derivatives strategy. Josh Younger and United States chief economist Michael Feroli wrote:

“This is mainly about the hegemony of the US dollar. The issue of the world reserve currency and the medium of exchange for international trade in basic products, goods and services has enormous advantages.”

The most fragile connections in the world dollar system

Digital currencies could threaten US geopolitical power, JPMorgan warns
Digital currencies could threaten US geopolitical power, JPMorgan warns

While analysts do not expect the dollar to lose its status as the world’s reserve currency soon, they have identified some of the weakest links in the currency’s to handle operations and the SWIFT messaging system.

In particular, SWIFT was a key lever in imposing sanctions on the Iranian regime, targeting the U.S. government, and suspending access to Iranian banks in 2018. This created tensions with the European bloc where finance ministers tried – and ultimately failed – to exempt the cross-border payment network from restrictions. Some argue that the suspension of SWIFT violated European Union law.

JPMorgan points out that the United States would be less able to achieve its geopolitical strategic goals if the countries could avoid the SWIFT suspension. which are based in part on the world domination of the dollar.

According to analysts, it is vital for the U.S. to take the lead in digital currencies

For the United States in particular, the bank emphasized that “digital currency is an exercise in geopolitical risk management“”

However, The management of this risk does not necessarily exclude a digital currency component. Analysts said:

“Offering a cross-border payment solution based on a digital dollar would be a very modest investment to protect an important means of projecting power into the global economy, especially if it is aimed at minimizing disruption to the structure of the national financial system.”

Cointelegraph has previously reported similar views from Judy Shelton, one of those nominated by President Donald Trump for the United States Federal Reserve Board of Governors.

Shelton campaigned for the potential of a future digital dollar to “maintain the priority of the dollar worldwide”. and an option she believes the US is “forced to think”.

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