A digital currency backed by a group of nations is needed to compete with the US dollar, which has reached a level of dominance that poses a barrier to economic growth in much of the world, Bank of England Governor Mark Carney said in a speech to fellow central bankers on Friday.
“If the share of trade invoiced in SHC [Synthetic Hegemonic Currency] were to rise, shocks in the US would have less potent spillovers through exchange rates, and trade would become less synchronized across countries,” Carney said.
In addition, reducing the influence of the US dollar on the global financial cycle, “would help reduce the volatility of capital flows to emerging market economies,” Carney added.
The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new digital currency that displaced the dollar’s dominance in global credit markets, according to Carney.
Carney’s proposal came at an annual conference of central bankers, policymakers, academics and economists hosted by the Federal Reserve Bank of Kansas City in the US state of Wyoming.