The future of fiat currencies is possibly under threat from digital currencies. Stephen Harper, a Canadian economist who served as the country’s Prime Minister from 2006 to 2015, believes that bitcoin and central bank digital currencies (CBDCs) have the potential to replace fiat in the future.
In an interview with Jay Martin, the CEO of investment service Cambridge House International Inc. at the Vancouver Resouce Investment Conference, said the hegemony of the U.S. dollar can only be threatened by large currencies such as the Euro or the Chinese yuan.
However, he was doubtful they would real threat because of the long-term uncertainty over the Euro and the “arbitrary measures” the Chinese government would take regarding the yuan’s value.
In his view, bitcoin and gold have the potential to become major reserve currencies.
“It’s hard to see what the alternative is to the U.S. dollar as the world’s major reserve currency. 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,” he said.
CBDCs are also in the mix
The former Prime Minister, who was at the helm of the country during the 2008 financial crisis, also said that CBDCs are “inevitable” to some degree but would come under regulatory scrutiny around the world.
He is concerned that central banks would turn into “general bankers” rather than financial watchdogs, and this could have negative effects on the launch of any CBDC.
“Ultimately, if you have a digital currency and the purpose of the central bank is to control inflation and create a stable currency and priceability, then digital currency is just kind of an evolution of the marketplace,” said the former Prime Minister.
“But if it’s part of a series of what I think are wild experiments as to the role of central banking, then it worries me a lot,” he added.
A number of countries in the world are working on CBDCs or studying their feasibility. The Deputy Governor of the Bank of Canada (BoC) Timothy Lane said that the central bank is developing a CBDC at a good pace.
The adoption of crypto and blockchain is expanding in Canada, and the country got its first licensed cryptocurrency exchange in September last year.
According to the Economist magazine, Canada came out of the 2008 financial crisis stronger than any member state in the Group of Severn (G7).