Robert F. Kennedy Jr., a lawyer, politician, and writer, shared his thoughts related to the Bitcoin backing of the US dollar at a Political Action Committee (PAC) event. At the event, he also came up with the policy to exempt Bitcoin holders from capital gains tax. The thought of Bitcoin backing the US dollar stirred the market and became the hot topic of the current market.
What is Bitcoin Backing?
Before knowing the effects of Bitcoin backing of the US dollar it is crucial to know the meaning of Bitcoin backing.
A backed currency is a type of currency that comes with the assurance that the currency can be exchanged for a predetermined value of another asset. Gold and Silver are listed under the most common assets to back a currency and a currency can be backed by anything.
In 1879, the US dollar was backed by gold, considered the very first use of the bake concept. Also, the concept was abandoned by New Zealand and Australia in 1929-1930, and by the UK, Canada, and Germany in 1931. The concept of backed currencies maintains the value of the currency as it is one of the essential tools to run the government.
However, most of the countries switched to the fiat model, and the national currency is not backed by any of the commodities like silver or gold. To break the tradition, Robert F. Kennedy Jr. came up with a new idea of Bitcoin-backing of US dollars. Just like gold in the past, the US government has the potential to back the US dollar with Bitcoin to achieve fantastic benefits. He simply suggested backing the US dollar and US treasury bills with assets including Bitcoin, silver, gold, and platinum. The plan is to back a small amount that is around 1% of treasury bills with these hard assets, mainly Bitcoin, just to explore the effectiveness of the idea. The main reason behind the idea is inflation and the Fed’s decision to hike the interest rates having an adverse impact on poor people.
How Effective Will the Bitcoin-Backing of the US Dollar be in the Market?
Looking towards the practical approach, it is challenging to Back the physical commodity or derive its value in other ways. This does not mean that BTC doesn’t have value in the market.
The current value of Bitcoin is $29,204 with a market cap of $567,763,638,349.
In the US, thousands of merchants are accepting Bitcoin as a payment for services and products, adopting it as a legal tender. It is assumed that the digital asset is performing well in the US market in comparison to other fiat currencies.
If the concept takes place in the US market, it will influence the stability and inflation concept directly. Increased stability and limited inflation are some major benefits of the concept in the marketplace.
Conclusion
In the PAC event, Robert F. Kennedy Jr. an American politician came up with the idea of Bitcoin-backing of US dollars to mitigate the issues related to inflation, scalability, and interest rates.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
