“Digital assets shake dollar hegemony”… Kenneth Rogoff, underground economy change warning
Kenneth Rogoff, former Chief Economist of the International Monetary Fund (IMF) and Harvard Economics Professor, warned that “The Dollar's hegemony is no longer a given.” In his newly published book 『Our Dollar, Your Problem』, he pointed out that the rise of China, geopolitical tensions, and the proliferation of digital assets are substantially threatening the global status of the U.S. Dollar.
In an interview with Bloomberg on the 25th (local time), Rogoff stated, “Bitcoin will not completely replace fiat currency, but it is already displacing the Dollar in the global underground economy,” saying, “The Dollar has long been the currency of informal transactions, but digital assets are rapidly replacing it.”
According to him, the underground economy in advanced countries accounts for 15-20% of GDP, and up to 30% in developing countries. He analyzed that “The use of digital assets in the underground economy is spreading for cash transactions, domestic labor wages, and various informal services for tax evasion purposes.” He noted that this is evolving beyond simple illegal transactions to a structure that circumvents the country's tax system and monetary policy.
Rogoff countered the criticism that digital assets like Bitcoin and Ethereum have “No intrinsic value,” stating, “The fact that they are being used as transaction methods itself proves their value.” He strongly defended the reason for the existence of digital assets by saying, “If they function as practical means of exchange in an underground economy of 20 to 25 trillion dollars, it is a clear value proposition.”
He also addressed the structural impact of the proliferation of digital assets on the U.S. economy. Expressing concern that “If Dollar demand decreases, the advantage the U.S. has of borrowing money at low interest rates disappears, and upward pressure on overall interest rates may occur,” he warned that effects could spread throughout the real economy, such as mortgage and student loans.
Furthermore, he warned that digital assets weaken the U.S. government's financial surveillance and control. “For money laundering, crime fund tracking, and sanctions to work, Dollar hegemony must be maintained,” he pointed out, “Digital assets bypass all these control means.”
Finally, Rogoff said, “Bitcoin and Ethereum will not completely replace traditional finance, but their influence in the underground economy will grow further in the future,” and added, “Even if the government strengthens regulations, it is not easy to reverse the reality that digital assets are already being used informally by one-fifth of the world economy.” He added, “The era of the Dollar is already slowly but surely coming to an end.”