Will the US step up to save its reserve currency status?

16 Nisan 2025

The US dollar’s dominance as the world’s reserve currency has long been considered untouchable. But today, that status is no longer sacrosanct—and the silence from Washington is getting louder.

That’s the view of deVere Group, one of the world’s largest independent financial advisory and asset management organizations, as data reveals central banks are accelerating efforts to reduce reliance on the greenback.

Nigel Green, CEO of deVere, says: “The dollar still dominates global reserves—but that dominance is beginning to resemble complacency. The global financial system is evolving, fast. And while the US clings to the past, others are preparing for a different future.

The dollar currently accounts for around 58% of global foreign exchange reserves—down from over 70% just two decades ago. In 2022, over half of the decline in dollar reserves was the result of active selling by central banks, not market fluctuations. This isn’t passive portfolio rebalancing. It’s a conscious pivot.

“The message from the rest of the world is clear,” he continues. “They no longer trust that the US will always be the steady hand, and they’re taking action accordingly.

“The reasons are mounting. Rising US debt levels, increasingly erratic politics, persistent fiscal indiscipline, and the weaponization of the dollar through financial sanctions have eroded the perception of the dollar as a neutral store of value.

“At the same time, global powers are creating alternatives: China and Russia are settling trade in local currencies; digital currencies and gold reserves are being built up by central banks in the Middle East and Asia.

“While there’s currently no single contender to dethrone the dollar, that’s missing the point. It’s not about one rival rising—it’s about confidence in the incumbent fading.”

“Reserve currency status isn’t a birthright. It’s earned—and re-earned—through stability, responsibility, and leadership,” says Green. “Right now, the US is risking that reputation.”

Losing that status would be more than symbolic. The US would face higher borrowing costs, reduced demand for Treasuries, and declining international clout.

The ability to run persistent deficits without immediate punishment—one of the dollar’s greatest advantages—would begin to evaporate.

The deVere CEO notes: “This is already impacting markets. Long-term investors are rethinking their exposure to the dollar. They’re buying gold. They’re testing digital assets. They’re watching closely how emerging economies reposition themselves.”

And the shifts aren’t just monetary, they’re geopolitical.

“A more fragmented currency system changes the balance of power. It could embolden regional blocs to assert more influence. It would weaken the US’s ability to sanction and isolate adversaries. It would fundamentally rewire global trade and investment flows.”

The digital revolution is also adding urgency. With over 130 countries exploring or launching central bank digital currencies (CBDCs), a new infrastructure for cross-border finance is being built. One that may not need the dollar at its centre.

“Digital innovation is a double-edged sword for the US. It has the opportunity to lead, yet so far, it has chosen to lag. That hesitation is being filled by others.

“This is an active shift in global capital dynamics. Investors should be reassessing currency exposure, increasing allocations to alternative stores of value, and preparing for a world in which the dollar doesn’t always have the final say.

The dollar’s decline may be gradual, but it could already be underway. The future will not reward those who assumed yesterday’s rules would hold, says Nigel Green.

And the message to Washington?

“Take this seriously. The dollar’s reserve currency status is a huge advantage—but it’s not guaranteed to be permanent. If the US wants to lead the future of global finance, it needs to step up to protect it.”

 

source: PriorConsults