Former IMF chief economist says bitcoin’s popularity is growing in the $25 trillion shadow economy

The specialist estimated the volume of the shadow economy at $25 trillion

Former IMF chief economist: BTC’s popularity in the shadow economy reduces demand for the dollar

27.05.2025 - 09:20

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3 min

What’s new? Kenneth Rogoff, former chief economist of the International Monetary Fund (IMF), argues that bitcoin flows are already affecting the use of the dollar in the $25 trillion shadow economy. This, in turn, is causing problems for the US economy by reducing demand for the dollar in developing countries.

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What else is known? In a recent interview, Rogoff explained that while the dominance of the US dollar has strengthened since World War II, its hegemony has recently been threatened by the Chinese yuan and the euro.

Although cryptocurrencies are just beginning to be considered part of the legal economy, Rogoff argues that they are convenient for the underground economy because the government cannot control all the flows in which they are involved.

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The shadow economy encompasses gray areas, which can account for up to a third of the gross domestic product in developing countries, and consists mainly of flows aimed at tax evasion. It is for these purposes that bitcoin is currently most useful.

Speaking about the real value of bitcoin and other cryptocurrencies, Rogoff emphasized the fallacy of the claim that cryptocurrencies have no “fundamental value” for use in transactions. There are also several countries that use cryptocurrency to circumvent financial sanctions imposed by the United States.

This use means that 20% of GDP, an estimate of the size of the shadow economy, is increasingly generated by cryptocurrency rather than the dollar, reducing demand for the currency worldwide and directly impacting the US economy.

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“Lower demand for dollars in the underground economy is driving up interest rates in the US, although that is just one of several factors driving up interest rates today,” Rogoff explained.

He emphasized that this use case for cryptocurrencies will become increasingly popular, and it will be difficult for governments to control it even with the gradual introduction of regulation.

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