The Future of Money: a three part series of Foreign Policy about emerging challenges to U.S. dollar supremacy

The Future of Money

Emerging Challenges to U.S. Dollar Supremacy

A new three-part Power Map series from FP Analytics, The Future of Money, examines the forces shaping the global financial landscape and driving the adoption of new financial instruments by major institutions as well as individual investors. Part I analyzes the dollar's status as the world’s reserve currency, details emerging challenges, and walks through China, Russia, and the European Union’s efforts to transform the existing financial system. Part II and III, coming soon, will provide an in-depth analysis of cryptocurrencies and their potentially transformative role in the global financial system and examine institutional adoption of emerging financial technologies. Part I of The Future of Money

 U.S. Control of the International Financial System and Sanctions Overreach

The widespread use of dollars as the predominant currency in international trade grants the U.S. extensive control over the international exchange of goods and services and makes its ability to enforce sanctions  particularly effective. The U.S.'s use of this economic power as leverage in geopolitical negotiations is now inspiring challenges to the current system from China, Russia, the EU, and other countries seeking to circumvent U.S. control.

Challenges to the Dollar and Existing Financial Infrastructure

While there is ample evidence to suggest that a change in the near term is unlikely, ongoing efforts to undermine the U.S.’s financial advantage could significantly alter geopolitical power dynamics and weaken U.S. leverage over major powers such as China and Russia while providing countries such as Iran and North Korea new opportunities to access international trade and markets.

Domestic and International Implications of China's Digital Renminbi

The Digital Currency Electronic Payment (DCEP) is a direct digital substitute for liquid renminbi currency now in circulation. If successful, the DCEP could accelerate renminbi internationalization, strengthen China’s existing alternative financial infrastructure, and give the country a first-mover advantage in developing the underlying technology and standards for future central bank digital currencies.