Benefits of early participation

Customers

Although the utility of any currency increases as its adoption spreads, many of the advantages of the Global Reserve System are available to customers even when it is functioning with a relatively small user base. The financial value of the global dollar is inherently known and stable at any scale. Businesses will immediately benefit from a superior settlement and reserve asset. In fact all customers are likely to find that when money itself has the performance of a diversified passive investment fund, there is little incentive to divert liquid reserves to the non-bank financial sector.

Increasing ‘global dollarization’ will simplify accounting for real financial value and reduce uncertainty relating to currency and interest rates. These efficiencies will advantage early adopters at the expense of slower businesses. This is a unique opportunity for management teams to become known for their leadership in exploiting practical innovation, and to avoid the opposite reputation.

Banks

Although GLB deposits will be fully backed by reserves, which are therefore unavailable for lending, banks will have the opportunity to make revenue in the order of tens of basis points on conversion, transaction, and account management fees. This is revenue that becomes available with very little effort or risk, largely as a result of new business. As noted, customers will be motivated to hold global dollar deposits at the expense of existing managed funds. Banks will effectively have the opportunity to retake ground that has gradually been lost to other elements of the finance sector.

The Global Reserve System cannot be uninvented, but it is yet to be seen who will benefit most from the coming change and how quickly it will be implemented. The decision to be an early adopter is mainly a matter of competitive pressure. Any delay in offering global dollar services will leave more progressive banks to gain market share that they will probably keep.

The certainty and efficiency of the GRS also makes it an ideal settlement and reserve option for banks themselves. It is likely that GRMIs will increasingly convert a wide range of obligations into global dollars to eliminate risk and take advantage of operational efficiencies in settlement. Delayed implementation will leave more advanced competitors to exploit these advantages for the duration of the delay.