The global reference currency proposed by the Governor of the Bank of England

The global reference currency proposed by the Governor of the Bank of England

A digital currency backed by a central bank could replace the dollar as the global reference currency, said Mark Carney, Governor of the Bank of England.

Speaking at the Wyoming Economic Policy Symposium, Carney discussed the need for a new international monetary and financial system (IMF). He also noted that although the US dollar has played a dominant role in the world order in the past, recent developments, such as globalization and trade disputes, can currently have a stronger negative impact on national economies.

“The influence of the dollar on global financial conditions could be similarly diminished if a financial architecture around the new digital currency were created and would eliminate the dominant position of the dollar in credit markets. By reducing the US influence on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies. “

The governor also explained that the new technologies can significantly affect the current network that protects the dollar. An increasing number of transactions take place online, and the global population prefers electronic payments instead of cash.

Global reference currency

Although he did not explicitly mention cryptocurrencies, Carney noted that

“The relatively high costs of domestic and cross-border electronic payments encourage innovation. New operators are applying new technologies to provide lower and more affordable retail payment services. ”

Mark Carney mentioned the possibility of creating a “Synthetic Hegemonic Currency (SHC)”. It should be a digital currency supported by a coalition of international central banks.

If this new SHC were to take on a larger share of global trade, “US shocks would have a much smaller effect on other economies,” he suggested, adding:

“In the same sense, global trade would become more sensitive to changes in conditions in the countries of the other currencies that support the SHC.”