The U.S. dollar reigns supreme in the global economy, not just as the world's most used currency for trade and commodities but also as the linchpin of financial systems and central bank reserves.
From oil to gold, nearly every major commodity is priced and traded in USD, providing a stable reference point across borders. The liquidity of the dollar is unparalleled, making it the default currency for financial markets and transactions worldwide. Contrast that with China's yuan—or renminbi—where capital controls and partial convertibility restrict its international use. Even as countries navigate uneasy relationships with the U.S., they still reach for the dollar in their wallets and reserves.
Over the past two decades, the US dollar share of global foreign exchange has fallen from over 70 per cent to above 50 per cent, yet the euro has managed only a modest climb to 20 per cent—a telling signal that no major alternative has emerged. China's currency, despite its aspirations, still holds a relatively small slice of global reserves. The dollar's dominance endures, supported by the sheer depth of the U.S. debt and stock markets, which provide avenues for investment, hedging, and savings unmatched by any other country.
Ironically, China itself benefits from this dollar supremacy, with vast holdings in U.S. assets that stabilise its own financial system. Yet, a threat to the dollar's stability looms with its potential "weaponisation"—a scenario where sanctions or geopolitical standoffs, as seen with Russia, push countries toward "de-dollarization" and alternative currencies like the yuan. Still, the yuan's limited liquidity and the lack of a fully convertible currency make it more of a coerced shift—a "marriage at gunpoint" rather than a voluntary transition.
Moreover, the dominance of the dollar is reinforced by the SWIFT system, the backbone of global payments, which lacks any truly viable alternative. While dissatisfaction with U.S. policy grows, the infrastructure and liquidity underpinning the dollar ensure that, for the foreseeable future, it remains king.
Hate the U.S. if you will, but you still can't hate the dollar.
Gold-backed currency system, digital currencies, cryptocurrencies & barter
The allure of a gold-backed currency system, digital currencies, cryptocurrencies, and even barter all come down to a core question: Can any of these offer the stability, liquidity, and flexibility that modern economies need?
A gold-backed currency sounds appealing in theory—after all, it ties money to a tangible asset. But in practice, it's inflexible. Economic growth is typically faster than new gold discoveries, meaning there just wouldn't be enough gold to back the volume of currency in circulation. This was a challenge in the 20th century, especially during crises when governments needed to print money to stabilise economies but were limited by gold reserves. Moreover, if countries revert to gold, they lose the flexibility to adjust their monetary policies during downturns, as they'd be constrained by their gold reserves. Essentially, a gold-backed system could cause deflation, higher interest rates, and limit a country's ability to respond to financial crises.
Digital currencies, which refer to centralized currencies issued by governments (like central bank digital currencies, or CBDCs), offer more flexibility. They could streamline transactions, reduce counterfeiting, and even increase financial inclusion. However, they still rely on trust in the issuing government. Additionally, digital currencies would inherit the same fundamental weaknesses of fiat systems, such as inflation risk and dependency on a central authority. While digital currencies could work as complements to current systems, they don't fundamentally change the way value is derived or managed in an economy—they simply offer a new, digital format.
Cryptocurrencies, on the other hand, are decentralized and often aspire to replace traditional currency systems altogether. But their volatility, regulatory uncertainty, and limited adoption make them unsuitable as stable, everyday currency. While they might work as speculative assets or even for niche use cases, mainstream economies need stable stores of value and predictable currency for trade. Most importantly, the decentralized nature of cryptocurrencies makes them difficult to control in a crisis—governments can't step in to stabilise prices or ensure liquidity, which is critical in times of economic distress.
Finally, barter seems even less likely to work as a scalable solution. Barter is highly inefficient: it relies on a "double coincidence of wants," meaning both parties must have something the other desires. This might work in localised or small-scale economies but is impractical for global trade. The coordination and infrastructure needed to facilitate complex exchanges are not feasible for large-scale transactions. Modern economies depend on a reliable medium of exchange to handle transactions quickly and efficiently, which barter lacks.
In the end, each system has potential but falls short of offering a realistic, comprehensive alternative to fiat money. The current system—though flawed—provides the liquidity, stability, and flexibility required to manage global trade and national economies, attributes that gold, digital, and crypto systems struggle to replicate fully.
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Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Petronas, an international relations analyst, and a senior consultant with Global Asia Consulting. He has a background as a senior researcher at the Malaysian Institute of Economic Research.