The US dollar has long been the dominant global currency, used by nations around the world for trade, investment, and reserve purposes. However, in recent years, there has been a growing trend of nations moving away from the US dollar and exploring alternatives. This trend, known as "de-dollarization," has been driven by a range of factors, including economic and political uncertainty, the emergence of alternative currencies and payment systems, and concerns about the stability and reliability of the global financial system.
At a recent meeting of ASEAN finance ministers and central bank governors, the topic of de-dollarization was discussed. Indonesia, in particular, called for phasing out the use of traditional payment providers such as Visa and Mastercard, in favor of developing domestic payment systems. This move is part of a broader trend towards reducing external dependencies and promoting greater economic integration within the ASEAN region.
Other nations around the world are also exploring alternatives to the US dollar. As we noted in our previous article, China has been actively promoting its currency, the yuan, as an alternative to the US dollar. The country has established currency swap agreements with other nations, allowing them to conduct trade and investment in yuan rather than US dollars. In addition, China has developed its own cross-border payment system, the Cross-Border Interbank Payment System (CIPS), which could eventually compete with the US-dominated SWIFT system.
Russia has also been pushing for a new global reserve currency, and the European Union has been promoting the euro as a reserve currency. Meanwhile, the rise of cryptocurrencies such as Bitcoin and Ethereum could potentially disrupt the global currency system and challenge the dominance of the US dollar.
While the trend towards de-dollarization is not yet clear in its implications for the global economy, it is clear that the global economy is undergoing a significant transformation. As we noted in our article on the world's biggest islands, global economic power is shifting, and nations will need to adapt to these changes in order to remain competitive in the years ahead.
In conclusion, the trend towards de-dollarization is driven by a combination of factors, including economic and political uncertainty, the emergence of alternative currencies and payment systems, and concerns about the stability and reliability of the global financial system. As nations around the world explore alternatives to the US dollar, the global economy is undergoing a significant transformation, and it remains to be seen what the implications of this trend will be. However, one thing is clear: in order to remain competitive, nations will need to be flexible and adaptable in the face of changing economic circumstances.
References:
-
ASEAN Briefing. (2021, March 22). ASEAN Finance Ministers and Central Banks Consider Dropping US Dollar, Euro, and Yen; Indonesia Calls for Phasing Out Visa and Mastercard. Retrieved from https://www.aseanbriefing.com/news/asean-finance-ministers-and-central-banks-consider-dropping-us-dollar-euro-and-yen-indonesia-calls-for-phasing-out-visa-and-mastercard/
-
Visual Capitalist. (2021, March 25). De-Dollarization: More Countries Seek Alternatives to the U.S. Dollar. Retrieved from https://elements.visualcapitalist.com/de-dollarization-more-countries-seek-alternatives-to-the-u-s-dollar/
-
Reuters. (2021, March 22). Indonesia calls for phase-out of Visa, Mastercard in push for domestic payment systems. Retrieved from https://www.reuters.com/article/us-indonesia-cenbank/indonesia-calls-for-phase-out-of-visa-mastercard-in-push-for-domestic-payment-systems-idUSKBN2BE0C0
-
CNBC. (2021, March 26). China is leading the global push towards a cashless society. Retrieved from https://www.cnbc.com/2021/03/26/china-is-leading-the-global-push-towards-a-cashless-society.html
-
Forbes. (2021, March 9). China's Cross-Border Payment System Hits Milestone, Offering Global Competition To SWIFT. Retrieved from https://www.forbes.com/sites/jamesconca/2021/03/09/chinas-cross-border-payment-system-hits-milestone-offering-global-competition-to-swift/?sh=20a9a63d63a9
-
CNBC. (2021, March 17). Russia is taking steps to ditch the US dollar. Here's why that's a big deal. Retrieved from https://www.cnbc.com/2021/03/17/russia-is-taking-steps-to-ditch-the-us-dollar-heres-why-thats-a-big-deal.html
-
Euro News. (2021, January 15). EU prepares to fight back over euro's global role. Retrieved from https://www.euronews.com/2021/01/15/eu-prepares-to-fight-back-over-euro-s-global-role
-
CoinDesk. (2021, March 12). What Is Ethereum? Retrieved from https://www.coindesk.com/what-is-ethereum
