Abstract
This study examines the structural mechanisms that have maintained the United States
(US) dollar's dominance and the emerging pressures reshaping the global reserve
currency system. Using a qualitative desktop research design that combines historical
analysis, theoretical frameworks, and an examination of current trends, the research
investigates a critical question: Are we witnessing the early stages of a transition toward a
multipolar monetary system, or will dollar dominance prove more resilient than current
pressures suggest?
The West's sanctions on Russia in 2022, which froze over $300 billion in reserves and
excluded major banks from the Society for Worldwide Interbank Financial
Telecommunication (SWIFT) payment network, demonstrated how dollar access serves
as a geopolitical instrument. The response was dramatic. Russia-China bilateral trade
settlement in non-dollar currencies increased from 25% in 2021 to over 90% by 2024,
demonstrating that large-scale international trade, including commodities such as oil, can
operate outside dollar-dominated channels when geopolitical circumstances require it.
The findings reveal that the BRICS nations (Brazil, Russia, India, China, South Africa) are
systematically building alternative infrastructures through payment systems like China's
Cross-Border Interbank Payment System (CIPS), which processed $19.5 trillion in 2023,
and Africa's PAPSS, which facilitates intra-regional trade in local currencies. Central bank
digital currencies are creating new possibilities, with China's e-CNY reaching over 260
million wallets and enabling cross-border settlement without traditional dollar
intermediation. The dollar's share of global reserves declined from 65% in 2015 to
approximately 58% by 2024, representing roughly $1.5 trillion in reallocation, a gradual
but significant shift.
However, the research also identifies substantial limitations that prevent a rapid transition.
The dollar maintains significant advantages, including a Treasury market exceeding $27
trillion in size, proven safe-haven status during crises, and network effects that create
high switching costs for other currencies. Competing currencies face constraints, including
shallow financial markets, capital controls, and underdeveloped institutional frameworks.
These factors indicate that any transition will be gradual rather than sudden...