Quora Answer: Is the US Over-Reliant on the Dollar’s Dominance as a Global Reserve Currency?

The following is my answer to a Quora question: “Is the US over-reliant on the dollar’s dominance as a global reserve currency?”

Yes, and the reliance is structural, not incidental.  The French economist and former finance minister Valéry Giscard d’Estaing coined the term “exorbitant privilege” in the 1960s to describe exactly this dynamic: a country that issues the world’s reserve currency can borrow in its own currency, run persistent deficits, and export its debt to foreign central banks who have no practical alternative but to hold it.  Robert Triffin, the Belgian-American economist, had already diagnosed the structural flaw a decade earlier.  To supply the world with the dollars it needs for reserves and trade, the United States must run persistent current account deficits.  That dependency becomes addiction once an entire government’s fiscal posture is built assuming the world will keep buying the debt regardless of how much of it gets issued.

The Consequences, in Numbers

The dollar still commands roughly 56.9% of global foreign exchange reserves as of the third quarter of 2025, according to IMF Currency Composition of Official Foreign Exchange Reserves data, down from a peak of 71% to 72% in 2000 and 2001.  That decline of roughly fifteen percentage points over two and a half decades is not catastrophic on its own.  It becomes significant when paired with what that privilege enabled domestically: a national debt trajectory Moody’s cited explicitly in its May 2025 downgrade of the United States from Aaa to Aa1, projecting federal debt reaching 134% of GDP by 2035, up from 98% in 2023.  Interest payments on that debt consumed 34% of federal tax revenue in the first quarter of 2025, up from just 9% in 2021.  A country that assumes infinite appetite for its debt eventually discovers the appetite was never infinite.  It was merely patient.

The De-Dollarisation Trend

The share of US dollars in official reserves fell from 57.79% in the first quarter of 2025 to 56.32% in the second quarter, and further to 56.92% in the third, according to IMF data, marking the lowest level since 1995.  China’s Cross-Border Interbank Payment System, the most credible alternative to SWIFT, recorded 750,540 transactions worth approximately $270 billion in March 2026 alone, connecting 194 direct participants and 1,597 indirect participants across 117 countries, with annual volume reaching 180 trillion yuan, roughly $25 trillion, in 2025.  The yuan still accounts for only 3% of global SWIFT payments against the dollar’s 48%, so this is not yet displacement.  It is infrastructure being built for a multipolar world that no longer assumes the dollar is the only viable pipe.

Gold tells the sharper story.  Central bank gold purchases averaged just 400 to 500 tonnes annually before 2022.  Since then, purchases have run at over 1,000 tonnes a year, reaching 1,037 tonnes in 2023 and roughly 1,045 to 1,050 tonnes in 2024 and 2025, according to World Gold Council data, more than double the pre-2022 norm.  The buyers are overwhelmingly central banks in China, Poland, India, Turkey, and Kazakhstan, nations simultaneously trimming dollar exposure while building reserves a foreign government cannot freeze.

Why the Weaponisation Backfired

In February 2022, the United States, coordinating with the European Union, United Kingdom, Canada, and Japan, froze approximately $300 billion of Russia’s central bank reserves in response to the invasion of Ukraine.  This was, until that moment, a theoretical risk that central banks discussed in seminar rooms rather than genuinely priced into their reserve strategy.  Overnight, it became demonstrated fact: dollar and euro reserves held in someone else’s financial system can be rendered inaccessible by a political decision, with no court proceeding and no advance warning.  Sanctions cut Russia off from key parts of global financial markets and froze nearly half of its $640 billion in gold and foreign exchange reserves, triggering its worst economic crisis since the 1991 collapse of the Soviet Union.

Every non-aligned central bank on the planet absorbed the same lesson simultaneously.  If Washington can freeze Moscow’s reserves over a war Washington did not fight, Washington can freeze anyone’s reserves over a policy dispute it decides matters enough.  Gold sits outside that entire risk category.  It cannot be frozen, sanctioned, or rendered inaccessible by a foreign government’s keystroke.  That is precisely why 2022 recorded the highest central bank gold purchases since 1950, and why the elevated pace has not eased since.

The Multipolar Shift This Produces

None of this means the dollar collapses next quarter, and pretending otherwise would be dishonest.  The dollar and euro together still account for over 77% of global reserves, and no single rival currency offers the liquidity, legal certainty, or capital market depth the dollar system provides.  What has changed is the assumption of permanence.  The weaponisation of the dollar was meant to demonstrate American financial power.  It has instead demonstrated the exact vulnerability every reserve currency eventually reveals: the moment holders discover the asset can be turned into a hostage, they begin, however slowly, to hold something else instead.  Washington did not lose the reserve currency status by mismanaging the economy alone.  It accelerated the loss by proving, in a single afternoon in February 2022, exactly why nobody should want to depend on it completely.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code