When Donald Trump’s former adviser, Steve Bannon, praised Bitcoin last year as “disruptive populism” and revealed he was working on his own cryptocurrency, it was evidence of something many people had long suspected: The forces driving the growth of anarchic, get-rich-quick digital tokens are very similar to those buoying Trump and his imitators.
Both are born out of a resentment of establishment politics and a hatred of central authorities such as the Federal Reserve.
Last week, though, the U.S. president turned his back on alt-right cryptonomics with a series of tweets that made clear he has time for only one currency: The dollar.
Trump made three unusually thoughtful and concise points. One: Bitcoin and other cryptocurrencies are great for criminals and speculators, and bad for everyone else. Two: Facebook Inc.’s proposed digital token — Libra — is going to put Mark Zuckerberg’s social network under tough scrutiny by financial regulators. Three: The U.S. dollar reigns supreme.
It will hurt Bitcoin supporters to hear it, but it looks like Trump is listening to the establishment and bringing the hammer down on potential threats to the dollar’s status as the world’s reserve currency, and with it the ability to enforce U.S. policy worldwide.
Despite repeatedly bashing Fed Chairman Jay Powell over interest rates — “way too high,” Trump groused in June – the president’s tweets echo the central banker’s views on crypto. Bitcoin is a “speculative store of value” that has failed to catch on, Powell said on Capitol Hill last week. He warned that Libra, in particular, raised serious concerns about financial stability and regulation.
Trump’s preoccupation with Facebook’s digital token is probably not whether Zuckerberg’s project conducts adequate know-your-customer and anti-money-laundering checks. For the president, it’s more likely to be a question of whether the cryptocurrency will serve American interests or undermine them. Libra’s ambition is to be a cross-border medium of exchange, effectively operating outside the banking system and catering to at least two billion users across Facebook, Instagram and WhatsApp.
Democratic Representative Maxine Waters — no friend of the president’s — frets that Libra could be a parallel system that rivals the greenback one day. It sounds more like Facebook First than Trump’s vision of “America First.”
To be fair, we already know that Libra will include currencies like the dollar in the basket of assets that backs it. We also know that the project plans to respect international sanctions, such as those re-imposed by the U.S. against Iran over its nuclear ambitions.
But Trump is laying out his stall early: If Libra is ever to hit the market with his administration’s blessing, it will have to be, as much as is possible, an extension of the U.S. dollar. If it starts to look like a vehicle to escape, or blunt, U.S. policies like sanctions or trade tariffs, the full force of those financial regulations will be felt. Remember that the one cryptocurrency actually banned by Trump is the Venezuelan petro.
The irony of all this is that the biggest probable threat to the dollar’s reserve status is Trump himself. Ray Dalio, the billionaire hedge fund founder, said last year that the dollar’s privileged position as the world’s currency was more obviously being threatened by the parlous state of the country’s finances than by digital tokens. America is “borrowing too much,” he said.
In the long run, this president may not be the dollar’s best friend.
Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.
