Key Takeaways
- Kenneth Rogoff says Bitcoin is reducing the U.S. dollar's dominance in the underground economy.
- The gray market, valued at up to $25 trillion, is increasingly shifting from cash to Bitcoin.
- Rogoff argues that Bitcoin has real value as a medium of exchange, especially in unregulated markets.
Kenneth Rogoff, former chief economist at the International Monetary Fund and Harvard professor, has warned that Bitcoin is eroding the U.S. dollar’s dominance, especially within the global underground economy.
Shifting currency dominance
In an interview with Bloomberg, Rogoff acknowledged the dollar’s current dominance but noted its grip is weakening.
He said, pointing to the growing role of the renminbi and euro:
I see it dollar’s dominance as in decline — it’s fraying at the edges.
The rise of Bitcoin in the gray economy
Rogoff emphasized that the underground or “gray” economy—mainly composed of tax evasion and unregulated transactions—has traditionally relied on U.S. cash.
However, Bitcoin is increasingly taking over that role.
He said:
Although crypto has not made significant inroads into the legal economy, it is increasingly used in the global underground economy.
Economic implications
Citing a World Bank survey, Rogoff estimated that the gray market accounts for about 20% of the global economy, valued between $20 to $25 trillion.
He argued that Bitcoin’s growing use in this sector diminishes the dollar’s influence and complicates financial surveillance by U.S. authorities.
Consequences of a weakening dollar
The weakening dollar, Rogoff added, contributes to higher interest rates across U.S. financial products—Treasury bills, mortgages, and loans—because the U.S. benefits from the “exorbitant privilege” of issuing the world’s leading reserve currency.
Bitcoin’s value proposition
Rogoff pushed back against the view that Bitcoin lacks value.
He said:
The notion that there is no ‘fundamental value proposition’ in transactions use of crypto is just wrong.
