Bitcoin can alter the financial dominance of the U.S. Dollar if the United States doesn’t realize the potential threats by not accepting the digital currency. Anthony Pompliano, Co-founder of the Morgan Creek Digital expressed his concern by referencing a warning investor Peter Thiel that China could leverage Bitcoin (BTC) to destabilize U.S. dollar.
The Vigilance over Bitcoin Threat
Anthony elaborated that without appropriate steps taken by officials, Bitcoin, similar to the web, can be utilized in manners that could compromise the financial power of the country. According to Thiel, China has used other currencies in the past such as the Euro in the oil supply chain and Bitcoin can be used in a similar manner,
“I do wonder at this point whether Bitcoin is to be thought of, in part, as a Chinese financial weapon against the U.S. It threatens fiat money, but it especially threatens the U.S. dollar,”
He also indicated towards the global competition for BTC mining dominance and that there are other countries who are going to try to use Bitcoin to try to destabilize or financially attack the United States.
Pompliano also said that just like the web, Bitcoin too can have both positive and negative aspects for Washington which the policy makers should not neglect. The current legal framework of Bitcoin acceptance and legality in the U.S. is something that needs to be overhauled as each state has its own policy and view on it, with no clear stance on the federal level. Pompliano stressed on this point as a deal maker or breaker,
“What we need is for the United States to be the leader here. We need to embrace this, so we need to make sure that we use this technology to continue to be a leader on the global stage.”
State-Centric Power Struggles
Bitcoin relies on Proof of Work (PoW) consensus to mine new coins. PoW is an energy intensive process that requires higher computing power as more miners join the network. Countries like China have very cheap electricity, meaning that majority of the mining operations are located in the Asian country, giving it dominance over the new supply of BTC.
Coupled with what has come to known as Hash Wars, the censorship-free nature of Bitcoin has been a cause of concern as it allows bypassing US financial restrictions. As a global financial power with influence stretching into every continent, US can have a major role to play in countering the use of Bitcoin and other cryptocurrencies for terror financing.