Is this the beginning of the end for US dollar hegemony?
For the fast-growing economies of the so-called Global South, China’s multi-CBDC platforms offer attractive alternatives to the dollar-dominated world built and controlled by the West.
As BRICS+ group convenes in Russia this week, de-dollarisation is again top of the agenda. But not just any type of de-dollarisation. Beijing and Moscow are eagerly developing a new variant of this virus which they hope will rapidly spread around the so-called Global South: digital de-dollarisation.
Led by China and Russia, the BRICS+ group is developing a system of “multi-CBDC bridges”. These are blockchain-based platforms that will allow their Central Bank Digital Currencies - digital versions of their local currencies – to flow across borders, straight through the internet, without relying on the US dollar or the institutions that uphold its "exorbitant status" as the global reserve currency, to use the famed, begrudging phrase of former French President, Valéry Giscard d'Estaing.
At a conference hosted by Bloomberg last week, Donald Trump vowed to apply 100% tariffs to countries that ditched the US dollar as their preferred currency of trade, stating that the US would be relegated to "third world status" if the dollar lost its role as the global reserve currency. But would tariffs do anything to deter the countries that are seeking to ditch the greenback?
In January last year, the BRICS expanded its membership from the original five members — Brazil, Russia, India, China, and South Africa — with the addition of Iran, Saudi Arabia, the UAE, Ethiopia, and Egypt. This enlargement significantly amplifies the group’s global influence. The bloc now accounts for approximately 37.5 per cent of global GDP (rising from 26.3 per cent prior to the expansion), 46 per cent of the world’s population, 43 per cent of global oil production and 25 per cent of global goods exports.
Today, 134 countries, representing 98% of global GDP, are researching or developing a CBDC. The race for the future of money is underway. China is leading the charge, and the US is lagging behind. Chinese-led multi-CBDC projects, such as the BRICS Bridge and mBridge, threaten to sidestep dollar dependency, opening new trade pathways for emerging economies to engage without American oversight.
For the first time, the dollar risks being excluded from vast portions of the global economy.
Trump has promised to block the development of a digital dollar, on the basis that it would represent "a dangerous threat to freedom", preferring instead to empower the private sector through the regulation of US-dollar denominated stablecoins, as well as to support Bitcoin adoption, including the creation of a national Bitcoin stockpile. But leaving the global fate of the US dollar to the private sector alone represents a gargantuan risk to its influence on the world stage.
A Harris administration would likely advocate for a US-issued CBDC — but would only get the backing of Congress if it were designed with democratic principles in mind.
In May of this year, the US House of Representatives passed H.R. 5403, the CBDC Anti-Surveillance State Act, sponsored by Majority Whip Tom Emmer (MN-06). The bill halts the issuance of a CBDC without explicit authorisation from Congress. “If not open, permissionless, and private, a CBDC is no more than a CCP-style surveillance tool waiting to be weaponized,” the bill stated.
A digital dollar would need to emphasise privacy protections and transparency, creating an alternative to China’s CBDC model, which allows for sweeping surveillance and control over financial transactions. By pressing ahead with a CBDC, the US could retain its influence in the global economy while promoting an inclusive, privacy-respecting approach to digital currency.
However, for the fast-growing economies and populations of the so-called Global South, China’s multi-CBDC platforms offer attractive alternatives to the dollar-dominated world built and controlled by the West. By facilitating instant settlement in international trade, these platforms will not only make trade faster and cheaper, but allow countries to circumvent western financial regulations or sanctions where inconvenient.
This shift will significantly diminish – if not entirely eliminate – the power of the US dollar as a mechanism for promoting and projecting the West’s economic priorities and values globally, as it was used to do over the course of the twentieth century.
These changes will have tangible impacts on the lives of many millions – if not billions – of people, both in the West and across the Global South.
The strategic composition of the BRICS+ nations, rich in natural and energy resources, stands in contrast to the resource constraints of the US, UK and Europe. While the US has somewhat mitigated its dependency through the shale revolution, the UK and Europe remain heavily reliant on external energy sources to fuel their service-oriented economies.
The BRICS+ countries, many of which are net energy exporters, are positioned to gain substantial geopolitical leverage as global energy demands continue to grow, giving these nations an upper hand in dictating terms and potentially coercing other states into adopting their digital currency systems.
The global race to develop CBDCs is also a battle for influence over the world’s unbanked population – hundreds of millions of individuals in developing countries without access to traditional banking services. The contrast between engaging in a world economy dominated by "liberal" digital dollars and pounds, or the digital yuan or ruble, will be a stark one.
For decades, global dominance of the US dollar has reflected Western values of free trade and free markets around the world. This has led to the free exchange of ideas, the promotion and protection of free speech, and the flourishing of artistic, cultural and technological innovation across the world. Chinese-inspired digital currencies, by contrast, are likely to be used as tools of coercion and control.
The dollar does not just represent Washington and Wall Street, but Hollywood and Silicon Valley. It embodies James Dean as much as it denotes Jerome Powell. For millions beyond the borders of the United States, the dollar represents "Life, Liberty and the pursuit of Happiness". If the prevailing money of the twenty-first century does not reflect these values, we will cultivate very different societies.
Both Presidential candidates, however, seem to be missing the real urgency of the situation. For the US, the choice is clear: take part in the race for the future of money with the same spirit of leadership and innovation that helped secure the dollar’s status as the global reserve currency in the first place, or risk being left behind, and allow some of the most groundbreaking technologies to have been invented since the internet to be harnessed by China, Russia and their allies, to the detriment of billions across the globe.
Casey Larsen and Professor Brunello Rosa are co-authors of Smart Money – How digital currencies will win the New Cold War, and why the West needs to act now, a book about the geopolitics of Central Bank Digital Currencies (CBDCs) which is being published by Bloomsbury this week
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