On nearly every available metric, the U.S. dollar dominates global finance - and makes up 59% of global foreign exchange reserves. This dominance provides benefits on many levels. But for as long as the dollar has been dominant in the global financial system, it has also been clear that this system does not work for everyone—at least not all the time. 

“However, despite occasional moves to diversify away from the dollar, it has been difficult to unseat - and we believe de-dollarization isn't likely to come from geopolitical competition alone.”

In fact, changes in dominant currencies have historically come from innovation, perhaps accelerated by conflict, rather than a single event. If the dollar is to be unseated, it will be by an alternative system that provides more benefits than those reaped by dollar dominance-and at a lower cost.



What innovation might look like

It is unlikely that an alternative system exists in perfect form today, but we can take clues from recent developments. Blockchain, for example, represents a significant potential disruptor to global finance. Digital currencies have the potential to disrupt money and banking in unpredictable ways. Alternatively, dollar replacement could come from a country that develops and commercializes some economy-shifting technology — whether that be in artificial intelligence, quantum computing, or clean energy that increases its importance to the global economy.

Innovation that disrupts the dollar’s dominance may begin in sectors outside of currency or foreign exchange itself. The dollar's primacy, after all, is built on a broad range of financial structures, including regulatory frameworks, global influence, contracts, and even sanctions.



For our full analysis of how access to technology, energy, and the global financial system will drive re-globalization and shape investment strategies, download the Megatrends report.