Currency dominance in the digital age

For more than 80 years, the US dollar has enjoyed unrivaled supremacy in world trade and finance, thanks to America’s unique combination of economic scale, credible institutions, deep and liquid financial markets, and geopolitical might, as well as, crucially, network effects.

- Hélène Rey

But a new variable is poised to reshape the global monetary order: data integrity.

As digital technologies increasingly act as the rails upon which money moves – through stablecoins, tokenized assets, and central bank digital currencies – the resilience and credibility of currency networks increasingly hinge not only on macroeconomic fundamentals, but also on the technological strength and security of the relevant infrastructure. Of course, macroeconomic fundamentals still matter, and digital currencies raise some conventional macro challenges. In particular, by privatizing seigniorage and facilitating tax evasion, stablecoins could shrink countries’ fiscal revenues.