Rand Paul Says Cryptocurrency Could Replace Dollar

Senator Rand Paul (R-KY) has suggested that a cryptocurrency could replace the U.S. dollar as the world's reserve currency and said that he has been "amazed" by the growth in digital currencies.

Paul gave an interview to Axios on HBO, which aired on Sunday, where he discussed cryptocurrencies and he appeared to offer criticism of the dollar, saying the U.S. currency is "not backed by anything."

The U.S. dollar is the world's reserve currency, which means it is widely used in international transactions and is the preferred currency for central banks to hold as part of their foreign-exchange reserves.

The dollar has held that position since the end of World War II and its value remains relatively stable.

Paul, speaking on Axios on HBO about the growth in cryptocurrencies, said: "I've been amazed at the growth of it and I've always been, you know, more a person who believed that our currency should be backed by something of real value like gold or silver or commodities, and always was wondering well crypto is not backed by anything either," Paul said.

The senator suggested that distrust in government currencies could benefit cryptocurrencies.

"But here's what I've started to believe now is that the government currencies are so unreliable, they're also fiat currencies, they're not backed by anything," he said. "The dollar has been more stable than most other countries and so it is the reserve currency."

"I've started to question now whether or not cryptocurrency could actually become the reserve currency of the world as more and more people lose confidence in government," Paul went on.

A fiat currency is a currency that is not backed by a commodity, but instead the value is guaranteed by the government issuing the currency. While the dollar was previously backed by gold, it has been a fully fiat currency since 1971.

Paul was asked about the use of cryptocurrency for illegal purposes and whether there should be more regulation.

"I guess I'm more concerned with government snooping into our private bank accounts, whether it's cryptocurrency or your bank account," Paul said.

The senator was referring to a plan from the Biden administration that would require financial institutions to report to the IRS once a year on the total amount of money that has gone into and out of bank, loan and investment accounts that hold at least $600, or have inflow and outflow of at least $600.

Republicans have expressed strong opposition to the administration's proposal.

Cryptocurrencies are not backed by the U.S. government or regulated by it. They are also not backed by gold or other commodities, but have seen major growth in recent years.

Paul has expressed his support for cryptocurrencies in the past and during his campaign for the Republican presidential nomination in 2015, he announced that the campaign would accept donations in bitcoin through its website.

Rand Paul Speaks at a Committee Hearing
Senator Rand Paul (R-KY) speaks at a Senate Health, Education, Labor, and Pensions Committee hearing at the Dirksen Senate Office Building on July 20, 2021, in Washington, DC. Paul has suggested cryptocurrencies could replace the U.S. dollar as the world's reserve currency. Stefani Reynolds-Pool/Getty Images