America should not push other countries to adopt the dollar

Subscribe to enjoy similar stories. When DONALD TRUMP returned to the White House there was widespread fear that his administration would seek to undermine the international role of the dollar. Today that seems like a distant memory.

The administration is hailing dollar stablecoins (a kind of cryptocurrency designed to maintain a stable value) as an opportunity to expand the currency’s realm, because each coin is backed by a dollar-based safe asset. The White House is reportedly weighing whether to encourage other countries to switch to the greenback. The idea goes beyond deeply troubled economies like Argentina—the typical candidates for the policy.

Even big, rich countries are becoming nervous. Officials at the Bank of England and the ECB have warned of the dangers of digital dollarisation. The appeal to America is simple.

More dollar users would reduce borrowing costs for its government and its businesses. The greenback’s primacy already reduces the returns foreigners demand to invest in America by 1-2 percentage points per year. This “exorbitant privilege" would grow as more countries adopt the dollar or more foreigners hold dollar stablecoins.

Abroad, the possibility of dollarisation can be a useful source of discipline. The dollar offers a store of value for those fleeing inflation caused by lax economic policies, such as the many Argentines with mattresses stuffed full of hard currency. The more accessible that stablecoins make the dollar, the harder it will be for governments to control capital movement and to inflate away their debt.