[Global Finance] Trump and the Future of Cryptocurrency

$10 Bill Lifespan Only 5.3 Years
Public Concern Over Physical Currency Resource Waste
Trump Shifts to Support Cryptocurrency
Unregulated Currency Debate Expected to Intensify

Baek Young-ran, Representative of History Journal

Former President Donald Trump, who was shot at a campaign rally, emerged as a leading candidate for the upcoming U.S. presidential election with a single photo showing him clenching his fist and bleeding immediately after the shooting. Naturally, curiosity arises about the future of America that Trump will redraw. Among these, Trump’s future currency policy, especially his support for ‘cryptocurrency,’ is attracting attention.

He was initially somewhat negative about cryptocurrency, but being sensitive to money, he changed his stance. What will the future of the dollar look like under Trump’s vision? First, let’s look at the history of the U.S. dollar. The U.S. Constitution originally authorized the federal government to issue coins, not paper money. Article 1 of the Constitution granted the federal government the sole authority to ‘coin money’ and ‘regulate the value of money.’ However, it said nothing about paper money. This was because the Founding Fathers had seen that the paper money issued by the Continental Congress to fund the American Revolution had become virtually worthless by the end of the war.

The Confederate States issued about $1 billion worth of paper money during the Civil War, more than twice the amount of money circulating in the United States. This policy of printing money led to murderous inflation, and the South was inevitably defeated by the North.

The collapse of the Continental currency undermined trust in paper money, but the delegates at the Constitutional Convention decided to remain silent on this issue. Therefore, during the first 70 years before the Civil War, banks issued paper money. The most common form of currency was notes printed by state-chartered banks that could be exchanged for gold and silver. From the founding of the United States until the passage of the National Bank Act, about 8,000 different institutions issued currency. This made controlling the money supply difficult and counterfeiting easy. With the passage of the National Bank Act, a federally chartered banking system was established instead of state-chartered banks, eliminating the vast variety of banknotes circulating nationwide.

Establishing a national currency was one of the first steps to stabilize and establish the newly independent economy. Before the war, Britain did not supply enough pence and shilling coins to the colonies, nor did it allow the colonies to create their own coinage. As a result, colonists often used coins from other European countries, including Spain, France, and Portugal, or bartered goods such as tobacco.

Massachusetts began producing its own paper money in 1690 to circumvent British rules. Other colonies followed Massachusetts’ example and issued paper money, which was used to exchange goods within the respective states or colonies. Most importantly, these notes, called bills of credit, were issued as mortgage loans, secured by one’s land. Issuing paper money helped alleviate the shortage of coins. However, the variety of circulating notes and coins made it difficult to assess the actual value of currency, causing confusion. Of course, counterfeiting also surged. After the war, the young United States tried to stabilize its economy. In 1785, the dollar was established as the new unit of currency based on the widely used Spanish silver dollar. The current U.S. dollar sign was derived from the Spanish-American peso symbol.

Foreign coins were once legal tender in the United States. Until the mid-1800s, the U.S. lacked sufficient precious metals to mint coins, so Spanish dollars and other foreign coins became part of the U.S. monetary system. Foreign coins were used as legal tender until 1857.

Meanwhile, the highest denomination bill in history was the $100,000 gold certificate issued by the U.S. Mint in 1934. The bill featured a portrait of President Woodrow Wilson on the front. This bill was not circulated among the public but was used only for transactions between Federal Reserve Banks. The highest denomination bills issued to the public did not feature presidents. The $10,000 bill was the highest denomination circulated by the federal government. Despite its value, it was adorned with the portrait of Salmon P. Chase, the Secretary of the Treasury at the time the National Bank Act was passed, not a president. The federal government discontinued issuing large denomination bills, including the $10,000 bill, in 1969.

When dollar bills are removed from circulation or become worn, the Federal Reserve Banks shred them. In some cases, the federal government sells shredded currency to companies that recycle it into building materials such as roof shingles or insulation. Among all denominations, the $5 bill has the shortest lifespan. According to the Federal Reserve, the estimated lifespan of a $5 bill is 4.7 years. The estimated lifespans of $10 and $1 bills are 5.3 years and 6.6 years, respectively. The longest estimated lifespan is for the $100 bill, about 23 years. As such, traditional physical currency issuance is undoubtedly a tedious process that wastes resources. In contrast, cryptocurrency can be free and efficient. However, human desires can be neither just nor efficient. Is an unregulated cryptocurrency truly possible?

Baek Young-ran, Head of History Journal