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Why the Idea of a Digital Dollar is Bullish for Bitcoin (BTC)

The global spread of the Coronavirus has continued to seriously impact the healthcare systems of all countries affected as well as their economies. In the case of the latter, the global pandemic has affected the various global stock markets in ways not seen since the previous stock market crash of 2008. Consequently, trading in the United States markets has been halted several times in the month of March as both the S&P 500 and the Dow experienced record breaking losses. Crypto exchanges are organizing charity campaigns.

U.S Congress Introduces, then Removes, use of a Digital Dollar in a Stimulus Package

Earlier in the week, the US Congress, and later the Senate, approved a $2 Trillion stimulus bill that will cushion American taxpayers as well as businesses, from the devastating effects of the Coronavirus. The initial draft of the bill had explored the use of a Digital dollar to distribute funds to affected individuals. The bill had floated the idea of banks creating and maintaining digital dollar wallets for individuals and business entities. However, the concept of a digital dollar was left out in the final bill that was later approved by both houses. 

Why the Idea of a Digital Dollar is Bullish for Bitcoin

The mentioning of a digital dollar and provision of digital wallets by banks, ignited some excitement amongst crypto enthusiasts who found this move very bullish for Bitcoin (BTC) as shall be explained. 

To begin with, such a move would familiarize every American citizen with the concept of a digital wallet on their smartphone, desktop or web browser. It is a known fact that the whole concept of digital assets is complex for the average individual and this is the reason many do not venture into crypto. Therefore, having an incentive from the government of redeeming $1,200 via a digital wallet will surely help in familiarizing more potential investors with Bitcoin and Cryptocurrencies.

Secondly, the implementation of a digital dollar would open the doors for other countries who will not want to be left behind in digitizing their national currencies beyond internal CBDC (Central Bank Digital Currencies). With the global smartphone penetration estimated at 42% of the global population, roughly 3.2 Billion individuals will potentially have access to Bitcoin as a result.

Thirdly, once global currencies are digitized on the blockchain, other financial products such as securities, bonds and commodities will follow suit en masse.The probability of such tokenized assets being traded alongside Bitcoin is high. Therefore, such exposure would eventually legitimize BTC to many institutional and retail traders who had first considered it a fad or bubble

Tokenization of Commodities

Further exploring the tokenization of commodities, we have seen a few crypto exchanges such as Bitfinex and, explore new ways of tokenizing precious metals and in particular, Gold. Bitfinex recently launched a Tether Gold (XUAT) to meet the growing demand for the trading of the precious asset. XUAT runs on the Ethereum blockchain and is pegged to physical gold.

Similarly, launched PhiGold (PGX): a token linked to an innovative mining venture. This token is not only pegged to the real price of gold, but it allows investors to get involved early before the actual precious metal is extracted from the ground. This aspect provides investors with an opportunity of funding the process of extraction at the PhiGold Barobo gold mine in the Philippines. Each PGX token represents 1/100th of an ounce of gold and can be redeemed for the physical metal, crypto or fiat after a certain period.  

The crypto exchange is an institutional-grade platform that provides not only a spot and derivatives market, but also an OTC platform for quick buys of bulk crypto orders. Its backend engine is run by LSEG technology thus allowing the platform to withstand considerable amounts of trade volume as was witnessed earlier this month when BTC dipped hard. This event seriously tested by known exchanges such as Bitmex and crippled the stock and crypto trading app of Robinhood. 

Why a Digital Dollar Might Take Some Time to Implement

As we can see from all the examples of tokenizing known assets, the process makes one particular middle-man redundant: banks. The digitization of currencies, securities, commodities, bonds and other tradable assets, cuts off these massive financial institutions that have been around for centuries. 

Recapping on the issuance of a digital dollar, it will involve each American citizen having their accounts directly held by the Federal government and not their local bank. Such a pitfall would result in the United States government having direct access to confidential information on a digital ledger that should be private to some degree for the average citizen. Once US citizens accept such a ledger system, they would automatically forgo on their 4th Amendment rights. Their Digital dollars will be the subject of unwarranted transaction searches and seizures. 

Concluding Thoughts

The idea of a digital dollar as mentioned in the initially proposed $2 Trillion stimulus bill, had left many crypto enthusiasts excited that such a move would onboard a lot of new investors to Bitcoin and the general digital asset spectrum. The mention of a digital dollar was eventually removed from the final bill but not before it had opened the doors to endless possibilities for the crypto and blockchain industries.

Image by tom bark from Pixabay

Disclaimer: This is a guest post. Koinpost does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. Readers should do their own research before taking any actions related to the company. Koinpost is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the guest post. Koinpost recommends you to do your own research before investing in any cryptocurrency, financial product, or event. Koinpost is not responsible for your personal financial losses.

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