International & Domestic Monetary Policy Reform with Blockchain and Cryptocurrencies

Given the economic collapses of multiple developed countries in the past years, and the economic struggles of developing countries, there is a need for an economic structure which is minimally influenced by a state's current quandaries and political affairs. As you've probably already hypothesized, blockchain technology can sufficiently provide a new economic structure that would be capable of assisting developing countries and rebuilding those that have experienced large economic set backs. What's great about this use case scenario for blockchain technology is that it showcases the revolutionary potential that blockchain AND cryptocurrencies have in improving the standards of individuals and systems (government, economic, social, or otherwise).

Let's start off with a bold statement: governments should adopt and establish an international currency, one that is digital. This may sound like a new world order/one world government type of situation. It wouldn't be, because in this case governments would collaborate together (possibly by forming a new department under the United Nations) on creating a blockchain that would allow for an easy conversion of domestic currency in exchange for the internationally-developed and accepted cryptocurrency. Granted, it may be more efficient and secure to use Ethereum's or another project's blockchain. However, given the large scale and vital use case of this certain cryptocurrency, a new blockchain may need to be developed. 

This government-created and backed cryptocurrency wouldn't be used to make purchases by the general public, but used by the governments themselves exclusively. This crypto would be used for trading practices such as pricing global commodities and settling trade accounts. It would essentially take pressure and reliance off of the U.S. dollar, which is seeing an increase in demand for. As a result of this demand, it increases U.S. trade deficit which is a problem President Trump is taking very seriously as we are now experiencing a "trade war" in hopes to reduce this deficit. An international monetary reform revolving around the blockchain and cryptocurrency is needed to resolve these global trading issues and to establish better, more trustful partnerships. Check this article out to read more about monetary reform and trade and visualize how blockchain can be implemented.

As for the domestic level, blockchain can and has already been implemented for increasing economic standards. A great example is to look at Dubai as they hope "to become the world’s first blockchain-powered government. By 2020, the emirate wants all visa applications, bill payments and license renewals, which account for over 100 million documents each year, to be transacted digitally using blockchain...enhanced productivity will stem from moving to paperless government." If this can be achieved, Dubai will save well over a billion dollars each year. Although, integrating the blockchain into their systems would be an easier process compared to other countries since Dubai is one of the most technologically advanced cities in the world.

Nevertheless, governments should start thinking about how blockchain and cryptocurrencies can be used, specifically in regards to monetary policy. Tailored towards a country's needs and conditions, a cryptocurrency can be developed which will have characteristics including: a cap on supply so there is a precommited inflation rate, easy transactions, a non-volatile price if crypto is tethered, and secure storage for the crypto. But what if this cryptocurrency is created, then manipulated by authoritative individuals from within the government? "The solution: introduce a measure that allows for discretion if certain red lines are crossed. Quantitative easing, if policy makers find it appropriate, can be written in code ahead of time, allowing for purchases of specific assets that fall below predetermined price levels." This can protect from uncertainties of the future as well as manipulation because the blockchain isn't something that can be rewritten and manipulated with. If a new cryptocurrency is created to act as a country's official currency, it wouldn't be a bad idea to have the UN overlook the process and act as a third party to ensure the fair and democratic implementation of the blockchain and the new crypto.

El Petro is a prime example of this, as it is the first cryptocurrency to be issued by a government (Venezuela). The whitepaper reads "the State shall promote and encourage the use of Petro with a view to consolidating it as an investment option, savings mechanism and means of exchange with State services, industry, commerce, and citizens in general." The problem that has emerged with this concept, as it sounds great and a next step forward for blockchain implementation, is that this crypto and use case scenario is being spearheaded by President Maduro and his government. Maduro and the government he has taken control of aren't viewed nicely by other countries and the international community or even by his own people. It's a topic for another discussion, but the use of the crypto called Petro hasn't been viewed as beneficial. The whitepaper is still an excellent read, just to understand how other governments may try to implement a new cryptocurrency. In this instance, Petro doesn't have it's own blockchain, rather NEM blockchain is used.

As for other countries, time and time again the news is flooded with how a certain country's monetary policy is continuously having problems, most notably with inflation. Countries suffering from a stagnate economy but have an operational and non-authoritarian government should really consider using the blockchain, smart contracts, and even cryptocurrencies to develop a working monetary policy. The world renowned economist Milton Friedman wanted to replace the chair of the federal reserve with a computer because, as proposed with his his "k-percent rule", he believed "the best way to bring stability to the economy over the long term was to have central banking authorities automatically grow the money supply by a set amount (the "k" variable) each year, regardless of the state of the economy." Of course at the time, nobody would trust a computer to perform such a task and no one believed that simple rules should determine something so important. Well, today we have the blockchain, and Friedman's wish can and should come true. A cryptocurrency can be coded to grow by a set amount each year, just as bitcoin now does without a central authority and without a single security failure.

It will be interesting to see which state governments adopt blockchain and the like in order to improve their monetary policy and stabilize the domestic economy. It will take time for this integration to occur, but undoubtedly blockchain technology and cryptocurrencies will have global economic impacts sooner rather than later.