Cryptocurrency Erodes Dollars Dominance in Shadow Economy, Says Economist

Cryptocurrency is increasingly infiltrating the global underground economy, challenging the dominance of the US dollar. Kenneth Rogoff, former chief economist of the IMF, remarked on this trend in an interview with Bloomberg.

He pointed out that the influence of the American currency is gradually waning, with the dollar losing ground to the yuan and the euro.

«However, there is also cryptocurrency, as one of the primary markets for the dollar is the global shadow economy. In that realm, the government exercises no control,» the expert explained.

A significant portion of this sector involves tax evasion, often through cash transactions. Clearly illegal activities, such as arms trading and the sale of banned substances, represent only a small fraction of this economy. Rogoff estimated the total size of the shadow economy to be around 20% of the world GDP, equating to approximately $20 trillion to $25 trillion.

«This is a vast market where the dollar remains particularly dominant,» he emphasized.

In his view, cryptocurrencies are likely to continue expanding in this transaction segment since they allow circumventing traditional financial pathways and escaping governmental oversight. Consequently, economists like Paul Krugman, Nouriel Roubini, Jamie Dimon, and Warren Buffett, who dismiss digital assets as mere scams, are mistaken, he added.

«Cryptocurrency holds value. It is actively used for transactions. There is a significant part of the economy that will be difficult for the government to regulate, even with strict oversight. Therefore, it is not without merit. A lot is at stake,» concluded Rogoff.

As a reminder, at its peak in 2021, Bitcoin, Ethereum, USDT, and USDC accounted for $2.8 trillion, or 12% of international merchandise trade, according to data from the BIS.