Democratic 2024 presidential candidate Robert F. Kennedy Jr. has said he will gradually make the U.S. dollar a Bitcoin-backed currency if elected president.
At the Heal-the-Divide PAC event on Wednesday, Kennedy explained that backing the greenback with "hard assets" like Bitcoin and gold would re-stabilize the U.S. economy amid soaring inflation and signs of a de-dollarization trend.
"Backing dollars and U.S. debt obligations with hard assets could help restore strength back to the dollar, rein in inflation and usher in a new era of American financial stability, peace and prosperity," said Kennedy.
Kennedy plans to start "very small," backing one percent of issued Treasury bills with those hard assets at first before increasing the allocation every year, depending on the results of the initial step.
Besides backing the greenback with Bitcoin, Kennedy said his administration would exempt Bitcoin conversions to the U.S. dollar from capital gain taxes. He explained that it would boost innovation and safeguard citizen privacy, preventing the government from "weaponizing" currencies against free speech.
Kennedy said the U.S. would see significant growth in the tech sector with the new tax system. It will increase the U.S.'s attractiveness to investors, who currently prefer to direct their funds to crypto-pro countries like Singapore and Germany.
Earlier in May, Kennedy also discussed his commitment to boosting Bitcoin adoption, which includes "defending the right" to own said token. The president hopeful announced he would also accept campaign donations in the form of Bitcoin. An investment disclosure on July 9 revealed that Kennedy held $250,000 worth of Bitcoin despite his earlier statement about not having exposure to the token.
Kennedy said the U.S. could improve its economic resilience by diversifying its currency ecosystem. He reasoned that an "over-centralized" currency system could create a fragile economy.
Besides Kennedy, some of his rivals in the presidential election have also made crypto-related pledges. Republican presidential candidate Ron DeSantis, the governor of Florida, said he would ban the central bank digital currency if elected leader. Past reports suggested that the current administration and the Federal Reserve had been exploring the development of the digital dollar.
Weakening dollar in global market
Kennedy's recent pledge for dollar support came amid signs of the weakening dollar in the global market. The U.S. dollar's share in central bank reserves dropped from 71 percent to 58 percent in around two decades, according to recent data.
Nobel laureate Paul Krugman said he recognized the de-dollarization trend worldwide. Despite the declining dollar share in global reserves, Krugmain pointed out that the dollar's dominance in international trade remained stable. He said the declining dollar's dominance in global currency reserves happened because central banks diversified their portfolios.
Krugman also discussed concerns about the potential of certain currencies to replace the dollar as a reserve currency, especially the Chinese yuan. Over the past few years, the yuan has seen an increase in share in global reserves, albeit still falling significantly behind the greenback and the euro.
According to Krugman, it is unlikely for the yuan to replace the dollar anytime soon. He said several factors hindered the widespread adoption of the yuan, such as the use of Mandarin as a second language and the capital control by Beijing.
Berkshire Hathaway CEO Warren Buffett also said he was not worried about the de-dollarization trend.
"We are the reserve currency, I see no option for any other currency to be the reserve currency," said Buffet in May.
The billionaire said investors considered the greenback a reliable store of value, meaning they could rely on the currency for international commerce. Buffet also predicted that the global market would remain reliant on the dollar in 2065.