The U.S. dollar, once the undisputed king of global reserves, is facing a challenge to its dominance as countries around the world are increasingly looking to diversify their holdings and reduce their reliance on the greenback. According to recent data, the dollar’s share of global reserves dropped to 59% in 2024, down from 72% in 2002, marking a significant 13% decline over the last 22 years.
The rise of the BRICS nations, particularly China, has been a driving force behind this shift. China’s yuan has seen a modest increase in its share of global reserves, signaling a growing trend towards de-dollarization. The BRICS countries have been vocal in their calls for moving away from the dollar, with efforts to promote the use of their national currencies in trade gaining momentum.
China, in particular, has been pushing for the expansion of its Cross-Border Interbank Payment System (CIPS) as an alternative to the traditional financial infrastructure dominated by the dollar and SWIFT. The growth of CIPS has been significant, with a steady increase in participants joining the system, challenging the dominance of SWIFT in global transactions.
Despite these efforts, the dollar’s position as the primary global reserve currency remains secure in the near and medium term, according to experts. The dollar continues to dominate foreign reserve holdings, trade invoicing, and global currency transactions, with the euro and yuan not posing a significant threat at this time.
However, the push for de-dollarization is gaining traction, with discussions underway among the BRICS nations about potential new payment systems that could further reduce reliance on the dollar. Gold is also emerging as a popular choice for reserve managers looking to de-risk their portfolios in light of geopolitical uncertainties surrounding major currencies.
In the end, the key factors that determine a currency’s status as a reserve currency – stability, liquidity, and trust – still favor the U.S. dollar. While challenges to its dominance are on the rise, the dollar’s entrenched position in global trade and financial transactions continues to keep it at the top of the heap.
