Opinion - Markets

Ron Insana: Digitize the dollar faster and end the frenzy for fake money

Key Points
  • The world doesn't need a new currency, crypto or otherwise, to replace the U.S. dollar.
  • There are no currencies, save for those of failed states, that have less "backing" than bitcoin, Libra, ethereum, etc.
  • As for Libra, we know we can barely trust Facebook with protecting our privacy, do we want it to be a virtual bank for 2 billion people without the requisite financial architecture and infrastructure?
Omar Marques | LightRocket | Getty Images

To the Treasury Department and the Federal Reserve: Please formally digitize the dollar and put an end to all this crypto-craziness.

This bitcoin BS and Libra lunacy should stop.

We have a token that already is a medium of exchange, storehouse of value and unit of account. It's called the dollar. And, quite frankly, it's already largely been digitized.

How often does payroll department drop by your desk and leave a check?

Hardly ever anymore. Your pay is directly deposited into your bank account form which you may sometimes withdraw cash or coin.

More often than not, you use a debit/credit card to buy goods and services or pay your bills by automatic electronic transfer. That's digital design.

The world doesn't need a new currency, crypto or otherwise, to replace the U.S. dollar.

It's true that the cost of all financial transactions needs to come down and that more efficiencies are needed to speed up transaction times.

Cryptocurrencies are not created more quickly than dollars. They are not backed by anything, despite the complaints of crypto-enthusiasts who decry the use of fiat money. There are no currencies, save for those of failed states, that have less "backing" than bitcoin, Libra, ethereum, etc.

The U.S. dollar is backed by not just a $20 trillion economy, but by the assets owned by the U.S. government and by Treasury securities that carry a positive yield, making U.S. debt a haven for investors seeking a return on cash.

(A record $13 trillion of global sovereign debt carries a negative yield, again, making the dollar, and dollar-denominated assets, an attractive place in which to invest.)

The reserve currency

The U.S. banking system is well capitalized and holds excess liquidity to support the demand for dollars.

Further, the dollar is used in over 60% of all global economic transactions and is utilized in the vast majority of foreign exchange transactions. It is, in short, the reserve currency of the world … something 21 million bitcoins can never be.

Can that be said of bitcoin, or cryptocurrency exchanges, where hundreds of millions of dollars worth of coins have been stolen or gone missing?

As for Libra, we know we can barely trust Facebook with protecting our privacy, do we want them to be a virtual bank for 2 billion people without the requisite financial architecture and infrastructure?

(Libra is backed by a consortium of companies including Facebook. Calibra is the digital wallet from Facebook that will use the digital currency)

Even gold, of which I am not a fan, is a better store of value.

Trader Jack Bouroudjian points out that the total value of gold, held above the ground in this world, is worth $7.8 trillion at current market value.

For bitcoin to match that value, each of the potential 21 million coins created would need to be worth $360,000.

Bitcoin has traded between $1 and $19,000 over its lifespan, with its volatility far exceeding that of the world's major foreign currencies, or gold. That's hardly the attribute of a stable coin.

Remember as kids, we often got gifts of fake dollars and plastic coins? That's essentially the game that the crypto-kids are playing … except that this game has real world consequences that may well rob some well-intentioned investors of hard-earned money that they may convert into toy tokens.

Crypto is still a scam, a bubble, a speculation.

Legislators and regulators are right to question the value and validity of cryptocurrencies.

Governments shouldn't give up the right and obligation to create an environment in which money is as sound as it can be.

As yet, that has not occurred in the digital world.

Come on, Mr. Mnuchin and Mr. Powell, let's digitize the dollar and end this frenzy for fake money in the material world.