Just when many people are still immersed in the world of the rise of the dollar index, at present, the voices of de-dollarization or circumvention of dollar trading around the world have risen and fallen, the dollar has long lost the label of trust, people's confidence in the dollar has begun to rupture again (last time after the dollar broke away from the gold standard and the dissolution of the Bretton Woods system, please refer to the figure below for details), the world's many countries have the need to choose a new reserve currency or oil currency, and the latest news and data are feedback on this trend.
Since the Two Months of the Russian-Ukrainian conflict, from the IMF to Goldman Sachs to JPMorgan Chase and U.S. economists, there is now growing concern that U.S. sanctions against Russia could weaken the dollar's position, and the long-term challenge for the United States will be to maintain the crown of the dollar as the world's main reserve currency, but as the world moves toward multipolarization, the dollar's power and status are weakening.
According to a report released by the Institute of Financial Telecommunications of Global Banks (SWIFT) in April, the share of global usage of the US dollar in March fell from 43.5% in March to 41.07% in March this year, and the IMF's report in March also showed that the proportion of the US dollar in the global central bank's international foreign reserve unexpectedly fell to a 26-year low of 59.32% in the fourth quarter of last year, please note that this proportion was as high as 71% in 2000 (please refer to the chart below for details).
The dollar's share of global reserves has changed
Needless to say, the butterfly effect of global de-dollarization has begun, and the label known as "dollar" at the time is being washed away by the wave of de-dollarization, but considering that the dollar is still the investment currency, settlement currency, reserve currency and safe-haven currency of global financial assets, any major shift away from the dollar will not happen overnight.
However, the BWC Chinese Finance team has seen some initial de-dollarization, and now some countries have allowed them to trade in their national currencies while avoiding the us dollar, and de-dollarization will enter a new stage.
In a report published a week ago, Goldman Sachs warned that "the challenges facing the dollar now are similar to those faced by the pound in the mid-last century when the pound lost trust in the world economy".
In a report published in March, JPMorgan chase & Co. argued that "the dollar becoming a tool to limit Russia's financial system would greatly promote the maturity of a settlement system independent of the dollar and force a rethinking of the quality of the dollar" because SWIFT, which was indirectly controlled by the United States, failed to adhere to its founding purpose of becoming a neutral financial platform and became a simple tool of the West.
So, in the long run, this will actually pit the dollar and "destroy the dollar's reserve currency status." According to the latest news, these initiatives will only increase, in fact, for more than a decade, the global market has been trying to build a new financial system that does not depend on the dollar.
According to BWC Chinese network continues to track statistics, including Russia, Germany, Italy, Armenia, Portugal, Kyrgyzstan, Iran, India, Lithuania, Qatar, United Arab Emirates, Angola, Venezuela, Iraq, Brunei, Switzerland, Sweden, Cambodia, Kuwait, Nigeria, Bahamas, Pakistan, Cuba, Hungary, Brazil, South Africa, Indonesia, Malaysia, Thailand, Romania, Spain, Ireland, Netherlands, Kazakhstan, Belarus, Turkey, At least 39 representative countries, such as El Salvador, Paraguay and Ecuador, have begun the process of de-dollar centralization in their own way.
The BWC Chinese Network team has also summarized specific initiatives in global de-dollarization, including selling US Treasuries at a liquidation rate; increasing non-US monetary assets such as gold; abandoning anchoring the US dollar in exchange rates; trading goods in a bartering manner; signing local currency swap agreements between central banks around the world; regional local currency swap cooperation and research on decentralized digital currency technologies.
According to a follow-up report by the Economic Times of India on April 28, India is currently buying Russian oil at a discounted price, and the two countries are working to establish a new trading mechanism that allows settlement in local currency.
More importantly, India is looking forward to having a digital currency in the near future, in which case the rupee-ruble settlement will be another step towards the de-dollarization of the global economy.
Therefore, it is possible to start from Russian-Indian transactions, and it will also become a reality in terms of digital currency trade with Iran and the Eurasian Economic Union, and some signs of this are already visible.
According to The Cradle website on April 25, Sergei, a member of the State Financial Council of the Bank of Russia, proposed a new global financial system based on digital currencies and backed by a new basket of foreign currencies and natural resources (anchors).
Therefore, such a result is that digital currencies supported by local currencies or strategic natural resources such as gold, oil, and diamonds will slowly be at the center of the global central bank monetary system and will run parallel to the US dollar.
This means that countries subject to the U.S. financial system, including Russia and Iran, will benefit from the global lead in de-dollarization, and the de-dollarization butterfly effect will intensify, this time driven by blockchain technology that supports decentralization.
According to the latest IMF data, as of March, 105 currency authorities are participating in digital currency-related work, some countries have issued cryptocurrencies that anchor strategic resources, and others are running or planning to run on the blockchain with local currency credit value.
The latest development is that as of April 15, the United Kingdom, Germany, New Zealand, France, Canada, South Africa, Sweden, Vietnam, Switzerland, the Bahamas, Malaysia, the United Arab Emirates, Uganda, Kenya, Saudi Arabia, Israel, Venezuela, Turkey and Singapore are currently testing or using digital currencies, or have issued cryptocurrencies that anchor strategic resources such as gold, diamonds or oil, according to the Bank for International Settlements.
U.S. authorities have also reportedly signed an order on research and development of digital assets, including digital dollars, in March. South Africa's central bank announced on April 6 that it had successfully tested its second central bank digital currency pilot project, Khokha, in February, and was also involved in the CBDC pilot project Dunbar alongside Singapore, Malaysia and Australia. German authorities also said on April 22 that the country would be fully committed to digital monetization.
BWC Chinese Network Finance research team analysis believes that the global monetary system has accelerated into a competitive era of becoming a leader in digital finance, as more central banks around the world launch digital currencies, it may form a situation of coexistence and competition with cryptocurrencies.
In response, SWIFT Managing Director and Head of Innovation Nick Kerigan said on April 24 that the global central bank digital currency will become an important force in the future, stressing that SWIFT is in a unique position in terms of solutions to this challenge.
Reuters said on April 20 that at present, the central banks of European countries, the United Kingdom, Switzerland, Canada, Japan, Sweden and the Bank for International Settlements have jointly formed a digital currency development group. Even the IMF has hinted at plans to launch a global digital currency, the IMF Coin, under the SDR to replace the U.S. dollar.
Subsequently, according to a report released by the Bank of Japan on April 23, the bank announced that it had completed the first phase of its central bank digital currency proof of concept as planned and will begin the second phase of work in May, while the Ministry of Finance and Finance of Japan is also working with several of Japan's major banks to plan to establish an international network for encrypted digital currency payments, similar to SWIFT, around the world.
Since last year, Venezuela has officially settled its oil in an oil-based cryptocurrency. Immediately after, Iran also proposed the creation of PayMon, a cryptocurrency anchored by resources such as oil and gold, as one of several means of countering the dollar's economic dominance. Therefore, the digital currency that anchors the national currency developed based on blockchain technology as the core does not theoretically require technical support from the SWIFT system.
Not only that, according to the US financial website Zero Hedging reported on April 23, the Bank of Israel also released its annual report at the end of March, saying that the country has begun to increase non-dollar currency assets such as the renminbi and the yen for the first time in its foreign reserves, while significantly reducing the proportion of the dollar and the euro, the report shows that Israel will reduce the dollar from 67.4% held in 2020 to 61%, under the new adjustment, the proportion of the renminbi accounts for 2%, which also means that under the continued influence of the current Russian-Ukrainian conflict, Israel, which has close economic ties to the United States, has become a de-dollarized country and is about to begin to formally de-dollarize in the field of foreign exchange, which once again surprises investors.
Immediately after, Myanmar's central bank also issued an announcement a week ago, requiring all Myanmar people to convert their foreign currency deposits and foreign exchange from the sea to Myanmar's dollars into myanmar in the state-licensed banking system, which also means that the Myanmar authorities have also begun to suspend the dollar in international reserve assets, which also means that Myanmar is the 40th country to officially suspend the dollar, and in Addition, the Cuban central bank also asked foreigners not to bring dollars to the country and no longer accept dollars. (End)