However, the idea that the dollar has unchallenged supremacy has started proving wrong as a new threat is coming from within the US financial system. Many shadow dollars are now in the use of settling cross-border transactions which is considered a threat to the absolute dominance of the dollar. Shadow dollar is a kind of unauthorised and unregulated currency which enters the financial system and is used like dollars for settling transactions. Cryptocurrency is a good example of the shadow dollar.
It is learnt that multiple unregulated currencies are undermining the American dollar. Even widespread use of unregulated currencies is damaging America’s combat against arms dealers, sanctions busters and scammers. Local media reported almost as much money channelled through unregulated currency networks as through visa cards.
This channel produced more profit than BlackRock (largest asset management company), whereas very small manpower is required to run this unregulated currency operation. One unregulated currency, which is called Tether, a kind of cryptocurrency, has grown into an important driving force in the global financial system where as much as $190 billion transactions take place in Tether.
How Tether works as a supplement to the US dollar in settling transactions across the world, is a very complicated mechanism. Tether Holdings, the company behind this currency, issues virtual coins to a select group of direct customers which are mostly trading firms and usually send real dollars in exchange. Tether uses those dollars to purchase assets, preferably US Treasury Bonds, which eventually back the coin’s value. In the wider world market, Tether can be traded for other tokens or legal tenders through exchanges and local brokerage houses.
There is a practice where Tether verifies the identities of its direct customers. However, most of its secondary markets’ participants remain out of direct monitoring. The tokens can be hidden through chains of digital wallets to obscure the real source. Tether has now expanded and diversified their business scope and is trying to remain present in almost every business area. They are now investing even in start-ups which use Tether every day for their payment.
As reported in the local newspaper, Tether has become the first successful unregulated currency which has emerged from the cryptocurrency revolution that commenced about ten years back. This unregulated currency has made its owners very rich. At certain points Tether has amassed $120 billion assets, which are mostly held in risk-free securities viz. US Treasury bonds, bitcoin and gold.
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