The US new strategy : The Two Fronts of De-Dollarisation
Washington.USA
The US’s new strategy, built on regulating stablecoins and rejecting a CBDC, is primarily a defense mechanism designed to counteract two major, interconnected de-dollarization efforts:
the geopolitical backlash against the “weaponization of the dollar” through sanctions, and the concerted move by the BRICS bloc to create an alternative, multilateral trade and reserve system.
The US dollar’s share of global reserves has gradually declined from over 70% in 2001 to approximately 57-59% today, demonstrating that diversification away from the dollar is a slow, ongoing process.
The US is fighting this trend on two main fronts:
1. The Geopolitical Backlash: Sanctions and the ‘Weaponized Dollar’
The most potent fuel for de-dollarization is the perception that the US has “weaponized” its currency and financial system by imposing sanctions.
By freezing the foreign reserves of adversaries and excluding their banks from the SWIFT messaging system, the US demonstrates its ability to unilaterally inflict severe economic pain.
The Primary Driver:
Risk Aversion: Countries like Russia (whose dollar reserves were frozen after 2022), Iran, and Venezuela are actively seeking alternatives to mitigate this risk.
The coordinated Western sanctions on Russia following the invasion of Ukraine were a watershed moment, showing that even the euro and other Western currencies are susceptible to being frozen, leading to a broader diversification push.
The Counter-Strategy:
Local Currency Settlement: In response, a growing number of nations are engaging in bilateral currency swap agreements and promoting local currency trade settlement.
For example, Russia and China, as well as India and the UAE, have significantly increased the use of their own currencies (Ruble, Yuan, Rupee, Dirham) to settle oil and commodity trades, effectively bypassing the dollar’s role as the intermediary for international commerce.
How the US Counteracts:
The US stablecoin strategy is a surgical response. It offers countries a dollar-denominated asset (stablecoins) that is faster and more transparent than the current bank-based system but less susceptible to direct US financial coercion than a traditional bank account or SWIFT payment.
By providing a digital, efficient, and private-sector solution, the US hopes to persuade countries that the solution to sanctions risk is not abandoning the dollar, but rather adopting its modern, regulated digital form.
2. The Multilateral Challenge: The BRICS Bloc and Alternative Systems
The most organized and significant challenge to the dollar comes from the expanded BRICS group (Brazil, Russia, India, China, South Africa, plus new members like the UAE, Egypt, and Iran).
This bloc is working to create a parallel financial architecture.
The Key Initiative:
Parallel Payment Systems: BRICS nations are aggressively promoting alternatives to the Western-dominated financial infrastructure:
China’s CIPS (Cross-Border Interbank Payment System):
Promotes the use of the Yuan (Renminbi) for trade settlement globally.
Russia’s SPFS (System for Transfer of Financial Messages):
An alternative to SWIFT, with India showing interest in linking its systems to it.
BRICS PAY:
A platform in development aimed at linking the local payment systems of member nations (like India’s UPI and Brazil’s Pix) for seamless cross-border transactions in local currencies.
The Reserve Diversification:
BRICS nations are actively diversifying their foreign exchange reserves, with their dollar holdings estimated to have fallen below 50% of their total reserves. Much of this shift is going into gold and a broader basket of “non-traditional currencies” (like the Canadian and Australian dollars), rather than a single major competitor like the Euro.
The Common Currency Ambition:
While the launch of a full BRICS common currency (potentially gold-backed) is a complex, long-term ambition, the discussion itself signals a commitment to a multipolar financial system where the dollar is not central.
How the US Counteracts:
The GENIUS Act directly addresses the BRICS trade challenge by making dollar-backed stablecoins the superior transactional tool. Stablecoins offer the speed, low cost, and 24/7/365 functionality that local currency trade settlement systems promise, but with the unmatched liquidity and stability of the US dollar.
By ensuring that every stablecoin is backed by U.S. Treasuries, the US strategy seeks to capture the growth of digital cross-border trade and prevent it from flowing into the competing Yuan or a future BRICS currency.
The US strategy is essentially a race: use innovation and regulation to digitally anchor the dollar before geopolitical backlash and the organized BRICS effort can build a credible, liquid alternative.
