Can Cryptocurrencies Challenge the Dollar’s Global Dominance?

The rapid growth of cryptocurrencies in recent years has been viewed by many as a speculative bubble. However, it also reflects growing scepticism in fiat currencies and fears that prevailing monetary policies are debasing their value. While few today can imagine cryptocurrencies challenging the global dominance of the dollar, with its backing of the full faith and credit of the US Government, private currencies issued by commercial banks, railroad companies and even religious institutions had been widespread in the US until the 1860s. It was the National Bank Acts of that decade that imposed government supervision over the banking sector and helped establish a national currency. Ultimately, anything can serve as a currency – from cowrie shells or lumps of metal to bits of data on computer servers – so long as people believe in it. Where faith in a state-issued currency is undermined, the private sector will inevitably innovate to create substitutes.