Despite the enthusiastic speeches of certain crypto players on “dedollarization”, the greenback remained in 2023 the ultra-dominant currency in international transactions. Demand for US government bonds also remained strong. These trends show that the goal of an international financial system less dependent on the USD remains elusive for the moment. The conditions do not seem to be ripe for such an upheaval, despite the ambitions displayed by part of the crypto ecosystem.
The Resilience of the USD in International Transactions
Data for 2023 confirms the overwhelming position of the US dollar in international trade. According to the Fed, the USD share in cross-border settlements was 44% last year. Far behind, the euro represented only 36% of transactions.
This dominance reflects the status of the USD as a safe haven, supported by the depth of the American bond markets. It also reflects the central role of the United States in world trade.
Furthermore, demand for US Treasury bonds remained strong in 2023 among foreign investors, despite the rate increase decided by the Fed. Non-US residents still held nearly $7.8 trillion of these financial assets at the end of 2023.
The limits of a transition from dedollarization to crypto
Some crypto players see decentralized digital currencies as a way to reduce the dominance of the dollar in international trade.
However, despite their growth, cryptocurrencies remain marginal in cross-border transfers. Their volatility and lack of regulation still prevent them from being a stable store of value. Stablecoins backed by the dollar paradoxically recall the centrality of the American currency.
More fundamentally, dedollarization comes up against the lack of credible alternatives to the status of the dollar as international reserve currency. Neither the euro nor the Chinese yuan seem able to dethrone the USD in the short term in this role.
U.S. government bonds also enjoy unparalleled market depth due to the size of the U.S. economy and financial sector. No other country can compete on this point.
Data from 2023 confirms the overwhelming preeminence of the USD in international transactions and global finance. Despite the emergence of cryptocurrencies, the conditions do not yet seem to be ripe for a massive dedollarization movement, despite the enthusiastic speeches of certain crypto players.
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