Digital currencies will not displace the dominant dollar

In an op-ed for the Financial Times, IMF chief economist Gita Gopinath states:

The global discussion on the future of money has been irreversibly altered in the six months since Facebook announced plans for a digital currency.

She further posits that while Libra has shown the benefits technological advances can have our payment system and further led people to rethink the nature of money, a shift in the world's reserve currency in the near future remains improbable due to the network effects around the U.S. dollar's role in world trade. Having been the dominant currency for decades, the perceived safety and liquidity could prove to be a significant barrier to competing currencies.

Why it matters

• After Bank of England Governor Mark Carney brought up the potential of a synthetic hegemonic currency, stablecoins have brought the discussion around digital currencies to the forefront of the global monetary system. Nearly every major central bank has at least looked into the potential of a digital currency, some with the goal to inevitably usurp the U.S. dollar's reign as the global reserve currency. However, despite potential advantages, there are numerous barriers making such a feat difficult.
• Libra or other central-bank issued currencies could act as a "gateway drug," causing those uninitiated to crypto to begin their exploration inevitably recognizing the benefits of more decentralized cryptocurrencies such as bitcoin.

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