Key Facts: The Atlantic Council predicts that for the foreseeable future, the greenback will remain prominent. They foresee a time when the dollar will be replaced by the Chinese yuan, the euro and the Japanese yen. The global de-dollarization of the economy is a fact and that is why more and more countries are seeking to expand the use of their local currencies. This, to reduce the market for the greenback, a currency that has reigned for more than five decades over the international economic spectrum. According to the most recent report from the Atlantic Council, the US dollar has lost the dominance it had in previous years. An example is that the share of this currency in the world gross domestic product (GDP) It has fallen from 40% in 1960 to 25% this year.
Furthermore, many countries have tried to develop alternative cross-border payment arrangements to the dollar to reduce their vulnerability to the increasing use of economic and financial sanctions by Washington, the long-standing US organisation argues. According to the Atlantic Council, one of the main influences on de-dollarisation is the oil market, more specifically what has to do with Saudi Arabia, one of the large and important producers of the so-called “black gold” throughout the world. According to the Atlantic Council report, the United States “has become much less dependent on Saudi oil,” with the North American nation currently being the largest oil producer in the world. Therefore, they leave an open market which is being taken advantage of by China, the second economic power that is already hot on the heels of the United States, according to the Atlantic Council. According to the organization, China has become Saudi Arabia's largest oil customer, representing more than 20% of oil exports from that country. This means that the Asian giant is taking advantage of the decline in influence of the United States in the Middle East to boost international trade, according to the entity.
Currency diversification, a key point
Atlantic Council highlights that Saudi Arabia, in a clear interest in moving away from the US dollar, undertook the Currency diversification for international oil sales. Something that has been taken advantage of by China, a country that has paid for crude oil purchases with physical yuan and digital yuan, as reported by BitcoinDynamic. The Arab country's strategy of diversifying currencies from other countries and discarding the dollar standard «requires Saudi Arabia to increase its international relations beyond the United States and Europe,» the report says. That is why this Arab nation is willing to join the BRICS bloc, an international political organization that brings together the governments of Brazil, Russia, India, China and South Africa, notes the Atlantic Council. This group of countries already publicly stated last year that they have plans to completely abandon the US dollar. in just over two years. This means that the economies of these countries will move away from the dollar standard and will begin to give greater representation to their national currencies.
The dollar's share of global reserves has declined, indicating that central banks have indeed been gradually moving away from the dollar. Source: International Monetary Fund. It must be remembered that in 2023, the BRICS announced a 3-year plan to completely get rid of the US dollar. For this purpose, the creation of an independent payment platform is proposed, that is not subject to the dollar standard and the sanctions that may be imposed.
In that order of ideas, the Atlantic Council maintains that Saudi Arabia's policy of diversifying currencies through international oil sales“marks a small but symbolic step on the path towards de-dollarization.”
“Increasingly, countries are using their own currencies in cross-border trade and investment transactions. The arrangements necessary to do so exist entirely outside the influence of any major power. These include currency swap lines agreed between participating central banks and the linking of national payment and settlement systems.” Atlantic Council.
The dollar will continue to dominate, for now
The organization highlights, however, that the use of local and national currencies for international payments currently implies a cost of efficiency. It, depending on local markets and other factors, such as liquidity coverage “to directly exchange local currency pairs without the dollar as a vehicle.” Due to the above, the Atlantic Council says that, in the foreseeable future, “the dominance of the dollar will remain.” However, a “gradual democratization of the global financial landscape” may be underway, “giving way to a world in which more local currencies can be used for international transactions.” In such a world, the organization says, “the dollar would remain prominent.” But I would not count on the “enormous influence” that it currently has on the world economy. Instead, its presence would be complemented by other national currencies, such as the Chinese yuan, the euro and the Japanese yen “in a manner consistent with the international footprint of their economies,” reflects the entity.
Although the US dollar remains the preeminent reserve currency, it has been losing ground to non-traditional currencies in global foreign exchange reserves. Source: International Monetary Fund.
Bitcoin, the new world currency
In a world that is clearly moving towards de-dollarization, bitcoin (BTC) emerges as a new global currency that can replace the US dollar.
According to Jack Dorsey, CEO of Block Inc., bitcoin is “freedom money, without permission.” Contrary to the dollar and all fiat money in generall, such as the euro, the yuan, the yen and, of course, CBDCs; that “require authorization from governments, banks, corporations and third parties.” “To participate in today's economy you need to ask permission, even from your government, to use the currency you have in your pocket. Permission from your bank and from every person you know. There is no freedom,” criticizes Dorsey. Something that bitcoin solves. Due to its decentralized characteristics, any person, entity or government can use this digital currency to make uncensored, free, fast and secure payments. There is no way for a government or central bank to control operations or finances. It is true financial freedom.