"Trust is one of the most powerful economic forces on Earth." - Charlie Munger
What currency will the world trust next?
The Spanish dollar (also known as the piece of eight/Spanish peso) was the first global currency. Between the 16th and 19th centuries, silver coins minted by the Spanish government circulated across all six inhabited continents and became legal tender in five of them (parts of Europe, Africa, Asia, and North and South America).
In many circulation areas, these silver coins could even be cut into halves, quarters, or eighths for small payments (hence the full coin's name "piece of eight"). Strictly speaking, the Spanish dollar was not a global reserve currency in the modern sense - but this was only because central bank foreign exchange reserve systems had not yet been established.
However, it did become a means of value storage for global private savers. In this sense, today's US dollar is the institutionalized successor to the Spanish dollar in the era of legal tender. These two global currencies serve the same functions: reducing international trade friction by providing an almost universal medium of exchange, unit of account, and store of value.
Today's global reserve currency follows its predecessor in both name and symbol - the "$" dollar symbol is believed to have evolved from the Spanish monetary mark (and is still referred to as the "peso symbol"). But their connection goes far beyond this.
The first dollars born in 1792 (established as the basic US currency unit at the time) were deliberately designed to have a similar silver content to the Spanish dollar: about 24 grams of pure silver (with 2 grams of copper added for durability).
However, the US government's minting volume was far from meeting circulation needs, so the Spanish dollar continued to circulate widely alongside the dollar - these two "dollars" were considered interchangeable in daily transactions for decades, with the Spanish dollar maintaining legal tender status in the US until 1857. This was natural, given their identical metal content.
But the lesson of the Spanish dollar lies in the fact that its value was not solely derived from the metal itself.
The core reason it became the first world currency was people's trust in its issuer. Although multiple countries minted silver coins in the 17th century, the Spanish dollar stood out - because it came from highly standardized royal mints in Spanish colonies, and because it was backed by a powerful empire that strictly enforced quality control and valued monetary credibility.
When people received a Spanish dollar, they didn't need to weigh it individually or test its purity; as long as it came from a Spanish mint, they were confident its silver content and quality met government promises.
However, after Latin American countries gained independence, Spain lost control of the silver mines and surrounding minting facilities crucial to global currency supply. The newly independent Latin American countries continued to mint almost identical silver dollars, but political turmoil led to inconsistent minting standards, deliberate adulteration, and even counterfeiting in loosely regulated mints.
As a result, global merchants and bankers gradually turned to currencies from more reliable issuers like England and the US - not because of higher silver content, but because of more solid credit.
The pound sterling subsequently became the next global currency - backed by gold convertibility and trust in British institutions. Although sterling paper money couldn't be melted, people believed the Bank of England would redeem it for about 7.3 grams of gold on demand.
However, the value dimensions of global currencies gradually transcended metal itself: trust in government credit, central bank stability, and financial market liquidity became equally important. In the 19th century, backed by gold reserves, rational governance, and London's developed banking system, the pound sterling ultimately replaced the Spanish dollar as the preferred medium for large financial transactions and reserves.
The next global currency would completely shed metal backing - the dollar's value now stems solely from collective belief in the Federal Reserve, US government, and financial markets. But this status may be difficult to maintain.
Although the US still has the world's largest economy, deepest financial markets, and most robust property rights system, inconsistent government policies and radical rhetoric are causing a crisis of trust in the dollar. So much so that more and more people are beginning to wonder: Where should trust be placed next?
Ken Rogoff believes the renminbi might prevail. "Many countries," he stated on the 'Monetary Affairs' podcast, "no longer trust the US. They would rather deal with China, understand China's business logic, know what China wants... compared to Trump, they prefer China to be in control (of information)." The consequence might be: "In an African city that once loved the dollar, when you pull out dollars, they'll ask 'What's this? Where's the renminbi?'" - This would be a transformative change.
Others predict an even more radical transformation: the next global currency might not be issued by any government at all. Bitcoin, as a "de-trusted" currency, is seen by many believers as capable of overcoming the trust issues that destroyed the Spanish dollar, undermined the pound, and now challenge the dollar. This would represent a natural evolution: from trusting Spanish minted coins → trusting US-issued paper money → potentially trusting Bitcoin to create magical internet money.
However, it still requires a certain degree of trust, as Vitalik noted in his blog that "blockchain applications have never been completely de-trusted". A $2 trillion market cap proves Bitcoin has already gained an astonishing number of believers - but I'm uncertain if it can win the trust of an even larger group to become a global reserve currency. Because history shows that people have always been accustomed to government-issued currencies.
But history also reveals: the dollar is neither the first global currency, and most likely will not be the last.
