New Currency System. Part I: The Cryptoverse

Prototypes of the first cryptocurrencies appeared as early as the 1990s. They were created with direct involvement of major banks such as Deutsche Bank, Citibank, and Credit Suisse. The project developers were David Chaum (DigiCash), Sholom Rosen ("digital dollars"), and Elon Musk (PayPal)—the same one whose fortune, according to Forbes data, reached $836 billion in 2025. However, a lull followed. And at the moment of Bitcoin's "official" birth in October 2008, no one particularly remembered its early "prototypes."%D0%9A%D1%80%D0%B8%D0%BF%D1%82%D0%BE%D0%B2%D0%B0%D0%BB%D1%8E%D1%82%D0%B0)

Today, thousands of cryptocurrencies are traded on hundreds of crypto exchanges around the world. However, the main capitalization of the crypto market falls on Bitcoin (60%). To this day, the expert community has not reached a consensus on whether Bitcoin is money or a financial asset. Nevertheless, Bitcoin is already influencing the transformation of the world monetary system. One can get some idea of the scale of this influence by considering Bitcoin's performance of monetary functions.

Suppose commodity X is moving from point A to point B. To do this, it is necessary to pay for transportation costs: services of the railroad, air carrier, or container ship. In addition, licenses, permits, insurance, and accompanying documents must be obtained. And once all these formalities are settled, a problem arises: the seller's (buyer's) bank currency account is blocked due to sanctions.

The way out of the situation is the Internet. A digital wallet on a digital platform solves the settlement problem. Cryptocurrency allows converting virtual tokens into real dollars. Problem solved. What does this remind you of? Correct. Special Drawing Rights (SDRs)—a non-cash settlement asset created by the IMF back in 1969. SDR holders can exchange them for dollars and use the latter to conduct any international transactions. SDRs can also be exchanged for euros and other currencies in the SDR basket (there are five in total). The key question is—how many SDRs do you have in your account?

Consequently, SDRs are not a currency, but only a potential claim to use dollars for settlements. Interest must be paid for using SDRs. Moreover, the IMF can freeze a country's assets in SDRs, as happened with Russia. In general, there are many hassles. Another matter is bitcoins, which allow instantly exchanging them for dollars. True, Bitcoin is a "perishable" product or, conversely, a "fast-maturing" one.

If you don't convert Bitcoin to hard currency in time, a drop in its price can bring significant losses to the owner. Or, conversely, quickly getting rid of Bitcoin can incredibly enrich the counterparty in the event of a sharp rise in its rate. In both cases, the risks are borne by the producer of real products.

Moreover, in the cryptoverse, Bitcoin has the same status as the dollar in the paper-electronic world—it has few real alternatives. And while the dollar has at least some value basis through its "link" to the cost of strategic exchange goods, Bitcoin lacks such a privilege.

It can be assumed that Bitcoin's role is reduced to maintaining the dollar's status as "first among equals," but in fact "more equal" than all other currencies in the world currency hierarchy. If we proceed from the picture described above, it turns out that the cryptoverse is not as decentralized as it seems. And it does not solve the problem of global imbalances.

However, Bitcoin can also be viewed from the other side. The potential losses arising from the use of Bitcoin in international settlements are due to the fact that it combines the properties of money and a financial (essentially speculative) asset. This is due to Bitcoin's price being "tied" to fiat currencies (the dollar). Meanwhile, it is precisely bitcoins that allow the first step toward de-dollarization and isolating international monetary circulation from national ones.

Today, many countries use bitcoins mainly for external settlements. Internal circulation of bitcoins is either completely prohibited or substantially restricted. This is due to difficulties in tracking transaction participants or stopping it if necessary.

Bitcoins, with their limit of 21 million coins issuance, could serve as the basis for creating international money with an unprivileged and non-inflationary emission nature. For example, the IMF could buy up all bitcoins at market price for $1.4 trillion—this amount corresponds to the cash currently at the Fund's disposal. Let us recall that the Fund's liquidity is intended precisely for settling trade imbalances. Then bitcoins could be distributed among countries proportional to their contribution to international trade.

Bitcoin's price could be "tied" to the value of SDRs (to give Bitcoin the usual status of an international settlement and reserve instrument). Then move from measuring the value of SDRs based on a basket of fiat currencies to fixing it in gold equivalent on the principle of one-way convertibility. That is, a country can acquire additional SDRs by paying with gold, but exchanging SDRs back for gold is not possible. This would stimulate the use of SDRs in mutual international settlements.

The "Bitcoin-SDR-gold" linkage, as a new international price standard, would instantly devalue the international value of the dollar. Its purchasing power would drop to zero, since the price of no commodity traded on the global market would anymore be tied to the American currency unit. It would be advisable to determine the value of SDRs in the real gold value that existed before 1913—the moment the Federal Reserve System was established, as the main source of permanent growth in world debt and inflation. Adjusted for the incredibly increased money supply, it would fluctuate around $100,000 per ounce ±30%, depending on which aggregate of the world money supply to take as a basis, M1 or M2.

Thus, the "gold" value of SDRs would be roughly comparable to the current Bitcoin price. As soon as the dollar loses its reserve currency status, we can proceed to the issue of writing off the world dollar debt—starting from the least developed countries and ending with the United States. 99% of the population, somehow in lifelong debt bondage, will benefit from this. Only debt holders will lose, but these are hardly poor investors.

The main merit of the above scheme is not even that it allows freeing the planet from debt and inflation. Although these two achievements alone seem incredible. The main thing is that countries will regain financial sovereignty in their national economies and be able to develop their own monetary policy and macroeconomic policy without regard to the world financial situation. It sounds unrealistic, but isn't everything that surrounds us today—from airplanes to smartphones—once seemed unattainable?

Author: Doctor of Economic Sciences, Professor of the Department of World Economy and World Finance at the Financial University under the Government of the Russian Federation Alexey Vladimirovich Kuznetsov.