It happened just over half a century ago and redefined the rules of the financial system that emerged after World War II. I am referring to the decision of the then President of the United States Richard Nixon to suspend the convertibility of the dollar with respect to gold and which gave rise to the so-called “fiat” money. Although it is a famous page in global economic history, reviewing it with modern eyes and in light of the unstoppable advance of digital money allows us to rethink the notions of “money” and “support” just when the classic mechanisms of global finance are cracking. and the new ones do not finish consolidating.
One of the obvious reasons for Nixon’s decision revealed that the finiteness of gold could show its less friendly side. The global abundance of the dollar exposed the currency to having its hypothetical exchange for gold drain the Federal Reserve and expose it to collapse. In other words, the storage capacity was completely questionable.
That turn of the page in 1971 implied the abandonment of the fixed exchange system and the currencies began to fluctuate freely. “Fiat” money (a Latin expression meaning “so be it”) entered the scene with the sole endorsement of legal circulation granted by the States. From then on we witnessed the erratic trajectory that that confidence could lead to, including sadly frequent phenomena such as uncontrolled monetary issue and the consequent inflation.
New board, new rules
Although we are still tied to the consequences of the “Nixon shock”, it is increasingly evident that the rise of cryptocurrencies hastens an abrupt change on the board. An illustrative fact in this regard is that in just a decade the global cryptocurrency market reached the figure sidereal of US$ 3 trillion.
But the numerical impact should not mislead us. Some cryptocurrencies carry the same conceptual weaknesses of the old gold standard and others, such as stablecoins, pay “face” for their parity with “fiat” money, as was demonstrated during the recent “crypto winter”.
These are not minor differences. The growing influence of digital money and the reasons that lead a growing number of countries to adopt it should not hide from us the essential questions: what digital money do we need and with what backing?
For this reason, when I hear that “not everything that glitters is crypto” I immediately think of the volatility of first-generation cryptocurrencies and their negative qualities linked to anonymity and lack of transparency. Although they have the undoubted merit of having popularized the technology ” blockchain”, today they are inadequate to promote an economy based on innovation.
The evolution towards second generation cryptocurrencies implies overcoming both the weaknesses of the support in a finite asset such as gold and the multiple disadvantages of “fiat” money. In this sense, it is no longer a new chapter in the young history of digital currencies, but a new scenario that revitalizes financial mechanisms and connects them with a real economy driven by assets with high growth potential.
In Latin America there are already numerous experiences that allow us to glimpse that cryptocurrencies backed in this asset class are possible and desirable. Agrotokens, AvocadoCoin, Kmushicoin and Unicoin are some of the names of the new crypto scene in the region that, beyond their differences, are redefining a new standard for “smart coins”.
The outstanding feature of this standard is that it simultaneously guarantees the possibility of storing value and the ability to carry out transactions, two essential properties for the monetary system of the coming decades to be capable of fostering a truly dynamic economy with certain possibilities of accelerating innovation. and the creation of wealth.