4 Great Powers That Will Overthrow the US Dollar, One of Them is Russian Sanctions

JAKARTA – There are a number of challenges to the dollar’s ​​status as the dominant currency in financial markets, according to researchers at the Brookings Institution. In a recent note, the think tank pointed to a shift in the US dollar’s ​​status in global financial markets, with the greenback’s use declining steadily over the past decade.

According to a report by the International Monetary Fund (IMF), although the dollar still dominates central bank reserves and world trade, it accounted for 59% of all global reserves at the start of 2024, down from 71% of reserves in 1999.

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Meanwhile, the share of non-traditional currency reserves has risen slightly. Currencies such as the Australian dollar, Swiss franc and Chinese yuan accounted for 11% of central banks’ foreign exchange reserves at the start of this year, up from 2% in 1999, according to IMF data.

The decline has raised concerns among investors that the dollar could soon be toppled from its top spot in financial markets. While most experts say that is unlikely to happen anytime soon, the think tank says the dollar’s ​​dominant status faces major challenges, pointing to four factors in particular.

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1. US sanctions

The US began imposing sanctions on Russia and its allies after Moscow launched its invasion of Ukraine in 2022. This sparked dedollarization efforts in Russia and other BRICS countries, indicating that they wanted to move away from the dollar in response to Western trade restrictions.

Russia, in particular, has taken steps to massively devalue its economy, with the country adopting a yuan exchange rate against the ruble, proposing a rival currency to the dollar, and reportedly pioneering a platform

An alternative payment that does not depend on the dollar.

China, which saw its companies hit with secondary sanctions from the US Treasury Department last week, has also signaled a shift away from the dollar, promoting the yuan as an alternative.