Finance

Is the dominance of the US dollar unravelling under Trump?

Published

4 months ago

December 5, 2025

Is the dominance of the US dollar unravelling under Trump?

The dominant global financial position of the US and its currency, the dollar, is wobbling under the second Trump administration. AURA88 / Shutterstock

The US has long sat at the centre of the global financial system, with the US dollar serving as the backbone of the world economy. Private investors rely on the dollar as a store of value in times of uncertainty.

Governments and central banks hold dollars to manage the value of their own currencies and as a form of insurance against economic shocks. Key commodities such as oil are also priced in dollars.

This dominant position, which has given the US enormous privileges including the capacity to borrow money cheaply and the ability to use the global financial system as a tool of statecraft, is often explained through the size and stability of US markets and the strength of its institutions. But beneath these economic fundamentals lies something more intangible: trust.

Countries and private financial institutions hold dollars, trade in dollars and borrow in dollars because they trust the US to maintain an open, rules-based international order. They also trust the US to honour contracts, protect property rights and manage the world’s financial plumbing responsibly by acting as an international lender of last resort during periods of crisis.

The dollar system has long had its critics. In the aftermath of the global financial crisis, which occurred between 2007 and 2009, emerging economies faced severe spillovers from US monetary policy and growing exposure to dollar-denominated debt. They also witnessed the increasing use of financial sanctions as a tool of US foreign policy.

China, Russia, India and other countries outside the west began constructing alternative financial infrastructures – new payment systems, currency swap lines and efforts to internationalise their own currencies. What began as a gradual search for some form of protection from US financial power quietly created cracks at the margins of the dollar-based system.

However, nothing has been as disorienting to the global role of the dollar as the second Trump administration’s overt attacks on the liberal international economic order. The imposition of sweeping trade tariffs, as well as efforts to undermine international and domestic institutions, represent a fundamental break with the promise of responsible American financial leadership.

Previous predictions of the dollar’s decline have proved premature. But as we argue in a recently published paper, the erosion of trust in the US as the steward of the liberal international order should be taken seriously. What we are seeing is not the immediate collapse of US financial power, but the beginning of a slow transition towards a fragmented, multipolar – and less predictable – global monetary system.

Three developments stand out. First, Washington’s commitment to the liberal economic order under the leadership of Donald Trump is being widely questioned. Rather than acting as the guarantor of open markets, Trump has reframed global trade as a transactional system where countries must “buy down” US tariffs. This means other countries must essentially now buy American Treasuries and other securities in exchange for access to the US market.

Second, surging US debt is increasing doubts about US fiscal stability. The Trump administration’s major tax cuts and spending plans are projected to create persistent deficits of around 6% of GDP, and US government debt has ballooned to record levels. This has prompted foreign central banks to reduce their dollar holdings.

Third, the Trump administration is openly attacking and undermining US government agencies and the country’s central bank, the Federal Reserve. Trump has repeatedly threatened to replace the current Fed chair, Jerome Powell, and dismiss other central bank officials since returning to the White House in January.

Central bank independence is considered a hallmark of credible monetary governance and undermining it raises doubts about whether the US remains a reliable anchor for the global financial system. According to Reuters, European officials are now openly questioning whether the Fed will continue to supply dollars to overseas central banks at times of financial strife.

Taken together, these actions are striking at the core foundation of dollar dominance: the assumption that the US will behave predictably, responsibly and with institutional restraint.

Despite the turbulence, no single currency is ready to replace the dollar. China’s renminbi still lacks open capital markets and strong legal protections, while the euro lacks a unified fiscal authority. New digital currency platforms remain experimental or speculative.

Still, the world is moving towards a more fragmented monetary landscape. Countries are diversifying their reserves into gold and other non-dollar assets. At the same time, regional payment systems are proliferating and dollar-denominated lending to emerging economies is declining.

Commodities are also priced increasingly in currencies other than the dollar. And no longer are only countries like China retreating from the dollar system, even US allies in Europe are encouraging banks to reduce their reliance on dollar funding.

The global economy is entering a financial interregnum – a period in which the old order is fading but the new one is not yet born. The dollar’s dominance will not vanish overnight as too many institutions and networks still rely on it. But its uncontested supremacy is coming to an end.

A fragmented financial system will reduce US leverage, while also making the global economy more complex and, possibly, more crisis-prone. The dollar is not dead. But the world is slowly preparing for life beyond dollar hegemony, and the second Trump administration may be the catalyst that turns long-running dissatisfaction into systemic change.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Fabian Pape receives funding from the Leverhulme Trust (ECF-2024-367).

Johannes Petry receives funding from German Research Foundation (446618653)

Tobias Pforr received funding from the European Research Council (grant agreement No 884910).

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Finance

Digitized Assets & Tokenized Finance Impact Report 2026 FII Institute Site

Published

8 hours ago

March 24, 2026

Press Room

Digitized Assets & Tokenized Finance Impact Report 2026 FII Institute Site

What if the global financial system could move at the speed of the internet unlocking trillions in value while expanding access to capital worldwide?

Developed in collaboration with Dante Disparte, Chief Strategy Officer and Head of Global Policy & Operations at Circle; Fred Thiel, Chairman and Chief Executive Officer of MARA, Inc.; and Ryan Hayward, Head of Digital Assets and Strategic Investments at Barclays, this report on digital assets and tokenized finance reveals how a rapidly emerging $16–30 trillion market is transforming traditional finance into a real-time, programmable, and borderless ecosystem.

It explores how the tokenization of real-world assets, the explosive growth of stablecoins processing over $30 trillion annually, and instant (T+0) settlement are redefining liquidity, reducing cross-border costs, and reshaping global investment flows. The report also highlights the critical role of financial inclusion, addressing a $330 billion SME financing gap alongside the rise of AI-driven transactions, energy-powered infrastructure, and evolving regulation that will ultimately determine who leads and who benefits in the next era of finance.

Finance

Oil rollercoaster pushes prices higher as US-Iran talks raise questions

Published

20 hours ago

March 24, 2026

Press Room

Oil rollercoaster pushes prices higher as US-Iran talks raise questions

Brent crude (BZ=F) and West Texas Intermediate (CL=F) futures contracts marched higher on Tuesday morning, having plummeted more than 10% at one point in Monday’s trading session. Questions continue to swirl around the potential reopening of the Strait of Hormuz and an end to the conflict between Iran and the US and Israel.

Brent crude (BZ=F) gained 1.7% after the opening bell in London, to around the $97.50 per barrel mark. West Texas Intermediate (CL=F) also rose 1.7% to $89.55 per barrel.

The moves come amid conflicting reports about talks between Iran and the US to end fighting. On Monday, president Donald Trump delayed strikes on Iranian power plants, having given Iran a deadline to restore trade through the Strait of Hormuz, saying Washington had productive conversations with Tehran.

But Tehran has since denied that it has been in touch with US negotiators, accusing Washington of price manipulation.

On Sunday night, Trump and prime minister Keir Starmer held a 20-minute phone call about the situation.

“They agreed that reopening the Strait of Hormuz was essential to ensure stability in the global energy market,” a Downing Street spokesperson said.

On Saturday, Trump gave Iran a 48-hour deadline to reopen the Strait — a measure set to expire shortly before midnight UK time on Monday.

In a Truth Social post, Trump wrote: “If Iran doesn’t FULLY OPEN, WITHOUT THREAT, the Strait of Hormuz, within 48 hours from this exact point in time, the United States of America will hit and obliterate their various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST!”

Yesterday, Iran’s defence council said in a statement that the “only way for non-hostile countries” to pass through Strait of Hormuz is “coordination with Iran”.

Finance

Iran issues its largest-ever currency denomination as accelerating inflation ravages a financial sector deemed a ‘Ponzi scheme’ even before the war | Fortune

Published

1 day ago

March 23, 2026

Press Room

Iran issues its largest-ever currency denomination as accelerating inflation ravages a financial sector deemed a ‘Ponzi scheme’ even before the war | Fortune

Iran’s economy was already crashing before the U.S. and Israel launched a war against the Islamic republic three weeks ago, and the relentless bombing since then has wreaked even more havoc.

In fact, high inflation triggered mass protests in December and January, prompting the regime to massacre tens of thousands of its own citizens. President Donald Trump warned Tehran against further violence and began a military build-up that led to the current conflict.

Inflation has worsened and apparently is so bad now the government issued its largest-ever currency denomination: the 10 million rial note (equivalent to about $7).

The new currency went into circulation last week, according to the Financial Times, and comes just a month after the prior record holder, the 5 million rial, came out.

As prices continue to spiral higher while the war boosts demand for cash, long lines formed to withdraw the fresh banknotes, and supplies quickly ran out.

Iran’s central bank said electronic payments are still the main methods for transactions, though the 10 million rial bill will “ensure public access to cash,” the FT reported.

But doubts about the viability of electronic payments have grown during the war as the U.S. and Israel target the regime’s levers of control.

In addition to bombing Islamic Revolutionary Guard Corps and Basij paramilitary forces, a data center for Bank Sepah was also hit on March 11. Sepah is the country’s largest bank and is responsible for paying salaries to the military and IRGC.

“Iran is already in the middle of a severe cash liquidity crisis,” Miad Maleki, a senior advisor at the Foundation for Defense of Democracies and a former Treasury Department official, said on X earlier this month. “As of Jan 2026, banks were running out of physical banknotes daily, with informal withdrawal caps of just $18–$30/day. Cash in circulation surged 49% YoY due to panic hoarding. The regime simply cannot pivot to cash payments, there isn’t enough physical currency in the system.”

Meanwhile, a currency collapse that began after last year’s U.S.-Israeli bombardment has fueled crippling inflation. The rial lost 60% of its value in the months after the 12-day war, and food inflation soared to 64% by October. It accelerated further to 105% by February, vaulting overall inflation to 47.5%.

The exchange rate fell as low as 1.66 million rials per $1 last month, though it strengthened to about 1.5 million rials as the U.S. temporarily lifted sanctions on Iranian oil.

Heightened demand for cash further stresses a financial system that was considered dubious even before the current war started three weeks ago.

The failure of Ayandeh Bank late last year forced the regime to fold it into a state-run lender, underscoring how fragile the sector was as bad loans piled up to politically connected cronies.

“This was largely theater. In reality, Iran’s entire banking system is insolvent, its balance sheets sustained by fiction rather than assets,” Siamak Namazi, who was a U.S. hostage in Iran from 2015 to 2023, wrote in a report for the Middle East Institute in January.

During his captivity, he learned from imprisoned former officials and business elites that politically connected borrowers bribed assessors to inflate the value of properties, which were used to obtain massive loans.

Instead of repaying the loans, borrowers just gave their properties to the bank, which sold them to other banks at a paper profit, according to Namazi. Those banks knew the properties were overvalued “garbage,” but played along in the scheme by dumping their own toxic assets in exchange and booking fictitious gains.

“The result is a closed-loop Ponzi scheme, sustained by mutual deception and regulatory complicity,” he added. “This practice has metastasized over the past 15 years and is far more extensive than this simplified description suggests. And this is only the banking system. Much of the rest of Iran’s economy is afflicted by similarly entrenched corruption and mismanagement.”