Former IMF Chief Economist Warns of Cryptocurrency’s Threat to U.S. Dollar Dominance

By Monika Ghosh | May 25, 2025

In a significant commentary on the evolving landscape of global currencies, Kenneth Rogoff, former chief economist at the International Monetary Fund (IMF), has expressed concerns that the rise of cryptocurrencies poses a growing threat to the supremacy of the U.S. dollar. In an interview with Bloomberg, Rogoff highlighted that while the dollar remains the world’s leading reserve currency, its dominance is gradually diminishing, a shift he attributes to several factors, including the increasing adoption of digital currencies.

A Decline in Dollar Dominance

Rogoff, who also serves as an economics professor at Harvard University, pointed out that the influence of the U.S. dollar has been "fraying at the edges." He cited the strengthening of the Chinese renminbi and the euro’s expanding role in global financial transactions as significant contributors to this trend. “I see it [dollar’s dominance] as in decline,” he stated. “That’s been going on for a decade.”

The rise of cryptocurrencies, particularly in shadowy economic sectors, is at the forefront of this decline. Rogoff noted that although cryptocurrencies have not significantly penetrated the legitimate economy, their use in the underground economy—often characterized by tax evasion and other illicit activities—has become more prevalent.

The Underground Economy and Cryptocurrency

Rogoff estimates that the underground economy represents roughly 20% of the global economy, valued at approximately $20 to $25 trillion. Historically, cash transactions, especially those conducted in U.S. dollars, have dominated this space. However, he asserted that cryptocurrencies are increasingly favored for these transactions, as they provide anonymity and an alternative to traditional banking systems.

In his recent publication, Our Dollar, Your Problem, Rogoff elaborates on how cryptocurrencies have begun to chip away at the dollar’s global standing, particularly in the realm of illegal activities as well as tax and regulatory evasion. He explained, “…although crypto has not made significant inroads into the legal economy, it is increasingly used in the global underground economy—where cash, especially U.S. dollars, had been king.”

Economic Implications for the U.S.

The effect of cryptocurrencies on the dollar’s status has broader implications for the global economic environment. Rogoff highlighted that a decline in the dollar’s He is ‘exorbitant privilege’—the significant advantages the U.S. gains from the dollar being the world’s primary reserve currency—could lead to rising interest rates. This, in turn, could affect everything from Treasury bill rates to mortgages and student loans.

As U.S. authorities rely on tracking financial flows to mitigate potential security threats, a shrinking market share for the dollar complicates these efforts. Notably, some U.S. lawmakers, including Senator Cynthia Lummis, have suggested that holding Bitcoin in reserves could help maintain the dollar’s strength.

Valuing Cryptocurrencies

Despite skepticism surrounding cryptocurrencies, Rogoff argued that labeling them as scams is misguided. He acknowledged that “crypto has value,” emphasizing that cryptocurrencies provide a legitimate medium of exchange. He stated, “The notion that there is no ‘fundamental value proposition’ in transactions use [of crypto] is just wrong.”

Rogoff’s insights reflect a growing recognition among economists that the financial landscape is changing, and as cryptocurrencies continue to gain traction, the dynamics of currency dominance may shift significantly in the coming years.

As the discussion surrounding the future of money evolves, Rogoff’s warnings serve as a critical reminder of the complexities and challenges facing the global financial system in the age of digital currencies.

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