Could cryptocurrency dethrone the dollar?

Bank of England governor Mark Carney has suggested that a virtual currency, modelled on Facebook’s Libra, could one day replace the dollar as king of the foreign exchange market.

The BoE chief aired vague proposals for a so-called “Synthetic Hegemonic Currency” at the recent Jackson Hole symposium of central bankers.

Here is a brief assessment of why the greenback is losing its lustre and the outlook for Carney’s proposed new digital currency, which would be supported by major central banks around the world.

The dollar has been the world’s reference currency since the Bretton Woods agreement in 1944, when various key units were fixed to the value of the greenback. It has retained its global supremacy ever since, thanks to the economic and political clout of the United States.