The dollar has the strength to fight off the digital challengers
The US dollar's hegemony, which is based on the currency's dominant role in fundraising and international commerce, is unlikely to be challenged by the proposed petroyuan or a common currency for the BRICS grouping. However, blockchain technology may be able to eliminate the need for the dollar as a middleman in illiquid currency corridors, reducing transaction costs by up to $120bn a year. While the coordination and trust required to create a multicurrency central bank digital currency network makes the idea unfeasible, the New York Federal Reserve has shown that a wholesale token of the US currency could be used to preserve its exceptionalism.
Proponents of de-dollarization might resent America’s exorbitant privilege all they want. But what can they do?