De-Dollarization:  Revolt Against The Mighty Dollar

“17 cents for a 100 dollar bill”

Yes! You read it right—17 cents is all it takes for the US to print a $100 currency note. This fact alone demonstrates how overwhelmingly the US benefits from dollar dominance. Unlike the US, the rest of the world needs to provide a value worth $100 in exchange for earning $100. The dollar being a global reserve currency means the US has complete control over the dollar reserves of the rest of the world. It’s fair to say that dollar hegemony is one of the prime pillars behind the US’s sole superpower status. To mollify such lopsided dollar ascendancy and create a level playing field, the concept of de-dollarization emerged. There have been attempts in the past to move towards de-dollarization, and after the Ukraine conflict, the concept regained relevance. In this piece, we will highlight the history, viability, and implications of de-dollarization amidst an emerging new world order.


The history of dollar dominance began after World War II. Post World War II when the United States emerged as the world’s preeminent economic and military power. The US dollar’s dominance as a global reserve currency can be traced back to the Bretton Woods agreement of 1944. In 1944, representatives from 44 countries met at the Bretton Woods conference to establish a new global monetary system. Under this system, the U.S. dollar was designated as the world’s reserve currency. This meant that the dollar would be used as a medium of exchange and store of value for international transactions.



To ensure the stability of the dollar, the Bretton Woods system pegged the dollar to gold at a fixed rate of $35 per ounce. Other countries pegged their currencies to the dollar. This meant that the value of their currency was tied to the value of the dollar. In effect, the U.S. dollar became the anchor currency of the global financial system. For several decades, the Bretton Woods system worked reasonably well. However, in the 1960s, the U.S. began running large trade deficits and printing more dollars to finance the Vietnam War. This led to an oversupply of dollars in circulation. It caused other countries to exchange their surplus dollars for gold, putting pressure on the US gold reserves. The U.S. could no longer maintain the fixed exchange rate with gold. In 1971, President Nixon unilaterally ended the convertibility of dollars into gold, effectively ending the Bretton Woods system.


US President Richard Nixon meets with Saudi King Faisal bin Abdul-Aziz al Saud in Jeddah, Saudi Arabia after signing a landmark agreement with the Arab kingdom (June 15, 1974).

After the collapse of the Bretton Woods system, the US dollar continued to be the dominant reserve currency. Many countries continued to hold large reserves of U.S. dollars, and the dollar was widely used as a medium of exchange in international transactions. The dominance of the dollar was further reinforced by the strength of the U.S. economy and financial system. In the 1970s, the petrodollar system came into existence. In this system, the US dollar is used as the primary currency for international oil transactions. This came when the US made a deal with Saudi Arabia, whereby the US agreed to provide military support and protection to the Saudi kingdom in exchange for Saudi Arabia pricing its oil exports in US dollars. It also meant that countries that wanted to purchase oil from OPEC had to first acquire US dollars.

This made the US dollar the dominant currency for international trade and helped to solidify the US’s position as the world’s sole superpower. Today, the US dollar remains the dominant reserve currency, accounting for around 60% of global foreign exchange reserves. However, there are some challenges to this dominance, particularly with the rise of new powers in a multipolar world. Many countries seek to challenge the dominance of the US dollar and establish alternate currencies as global reserve currencies.


De-dollarization refers to the process of reducing the reliance of a country’s economy on the US dollar as the primary currency for international trade, investment, and financial transactions. This may involve a shift towards using other currencies such as the Euro, Yen, or rupees or the creation of new regional or global reserve currencies. As there are always two sides to a coin, here are some potential merits and demerits of de-dollarization:


  • Reduced dependency on the US economy: De-dollarization can help reduce a country’s reliance on the US economy and make it less vulnerable to external economic shocks. This is because the US dollar is often used as a global reserve currency, and fluctuations in its value can have significant impacts on other economies. This can also help reduce the risk of exchange rate fluctuations and currency volatility.
  • Increased financial sovereignty: By decoupling from the dollar, a country can increase its economic sovereignty and gain more control over its monetary policy. This can help the country better manage its inflation and interest rates, which can contribute to more stable economic growth.
  • Boost to Domestic Industry: De-dollarization can help promote the growth of domestic industries by making it easier for businesses to access credit and financing denominated in their own currency. This would further supplement the exports and contribute to the GDP growth of the country.


  • Potential for economic instability: De-dollarization can also lead to economic instability in the short term, as people may lose confidence in the local currency if it is not as widely accepted or trusted as the US dollar. This can lead to inflation and a reduction in foreign investment, particularly if it is implemented hastily or without a clear plan.
  • Limited access to international markets: De-dollarization can limit a country’s access to international markets and make it more difficult to engage in global trade. This is because many international transactions are conducted in US dollars, and reducing the use of the US dollar can make it harder to access these markets.
  • Increased transaction costs: Finally, de-dollarization can also lead to increased transaction costs, as businesses and individuals may need to convert their currency into other foreign currencies more frequently. This can lead to higher fees and commissions, which can be a burden on individuals and businesses.


Over this period of time, there were several debates and attempts towards de-dollarization. The first major revolt against the mighty dollar was the introduction of the euro in 2002 as the sole legal tender in 12 countries. The euro came as Europe’s shot to dent dollar hegemony. It marked a milestone in a decades-long effort to provide Europe with an international currency of the same stature as the dollar. The euro did abate the dollar’s share in global reserves, but the effect wasn’t as expected. The euro is still largely confined to Europe itself.

Today, the euro accounts for 20% of global reserves, while the dollar fell from 71% in 2000 to 58.36% in 2022. Though the dollar did get hit, it still remained the dominant currency in the world. Since the advent of the euro, it has been the only potential challenger to the dollar’s supremacy. But it comes with its own limitations. Unlike the dollar, the euro isn’t ubiquitous in global financial markets. The US dollar is still the primary currency for oil trade. Moreover, the muscle and money power that the US brings to back its currency surpass those of Europe by miles. Nonetheless, the euro still holds the second-largest share of global reserves. The Euro set the ball rolling for other countries to come up with more alternatives to dethrone the mighty dollar.

Also Read, Understanding Dynamics Of India-Russia Relations


The US has nothing to fear but itself. It’s been evident time and again how America’s myopic, self-centric policy later came to bite itself. The US committed one such blunder in the Ukraine conflict by freezing Russia’s foreign currency reserves. So far, the U.S. and its allies have frozen more than $300 billion of Russia’s foreign currency reserves and slapped multiple rounds of sanctions on Moscow and the country’s oligarchs. While this move is hailed by Biden’s administration and its European allies as a major victory, it’s quite the contrary. Russia, after years of facing sanctions, has now grown immune to US sanctions. Sanctions have forced Russia to switch trade to other currencies and increase its gold reserves. No doubt these sanctions will harm the Russian economy, but the consequences will be far more dire for the US.


Freezing Russia’s dollar reserves completely crushed global confidence in the US dollar. One of the biggest characteristics of a global reserve currency has to be its apolitical nature, which contributes to its credibility in the global market. Today, the US has decimated the dollar’s credibility by using it as a political weapon to punish Russia. The US committed one such blunder in the Ukraine conflict by freezing Russia’s foreign currency reserves. The idea that the US could snatch away a country’s reserves at a snap sent warning signals to world leaders. As they say, “fear cuts deeper than the blade.” The fear of meeting Russia’s fate accelerated the calls for de-dollarization. Several countries, including India, China, Brazil, and South Africa, expedited the decoupling from the dollar system.


Some of the measures taken by the nation towards de-dollarization are as follows:

  • India and Malaysia announced they would settle their trade in the Indian rupee.
  • Officials at the ASEAN finance ministers and central banks meeting in Indonesia discussed the plans for cutting reliance on the U.S. dollar, the Japanese yen, and the euro and “moving to settlements in local currencies”.
  • Malaysia’s Prime Minister Anwar Ibrahim suggested setting up an “Asian Monetary Fund” to reduce reliance on the U.S. dollar.
  • Iran and Russia are planning to jointly issue a new cryptocurrency backed by gold to serve as a payment method in foreign trade.
  • 18 countries, including US allies like Germany, Israel, and the UK, agreed to trade in Indian rupees.
  • BRICS (Brazil, Russia, India, China, and South Africa) are in talks to introduce a new BRICS currency to counter the US dollar.
  • For the first time, China’s yuan replaced the US dollar as the most traded currency in Russia.
  • Sri Lanka decided to use Indian rupees for international trade.

Also Read, China’s Financial Web Does Not Spare Even It’s Own

These are a few among several examples that show a renaissance of de-dollarization in the current world scenario. Though we must admit that replacing the dollar is easier said than done, with the euro’s share of about 20% and the Yuan’s share of only around 3% in global reserves, the US dollar is still the tsar of the global financial system. Nonetheless, as they say, direction is more important than speed. If consistent efforts are made, the dollar will soon face a worthy contender to challenge its global reserve currency status.


Anmol Kaushik

Hi, I'm Anmol Kaushik, I'm currently pursuing Law (4th year) at Vivekananda Institute of Professional Studies (GGSIPU). I'm a defence enthusiast and a keen geopolitical observer.

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