De-dollarization refers to the process by which countries reduce their reliance on the US dollar as the primary currency for international trade and financial transactions. This trend has been driven by a variety of factors, including concerns about the dominance of the US in the global economy, fluctuations in the value of the US dollar, and efforts to reduce the exposure of countries to US economic sanctions.
One country that has been actively pursuing de-dollarization is Russia. In recent years, Russia has been working to reduce its dependence on the US dollar by increasing the use of alternative currencies, such as the euro and the Chinese yuan, in international trade. Russia has also been promoting the use of its own currency, the ruble, in regional trade agreements and has been encouraging other countries to use non-dollar currencies in their trade with Russia.
Another country that has been moving away from the US dollar is China. In recent years, China has been promoting the use of its own currency, the yuan, in international trade and investment. China has also been actively pursuing bilateral currency swap agreements with other countries, which allow for the direct exchange of currencies without the need for US dollars. In addition, China has been promoting the use of the yuan in its Belt and Road Initiative, a massive infrastructure development program that aims to connect Asia, Europe, and Africa.
Other countries that have been pursuing de-dollarization include Iran, Venezuela, and Turkey, all of which have been subject to US economic sanctions. These countries have been seeking alternative means of conducting international trade and financial transactions in order to reduce their exposure to US sanctions and maintain their economic sovereignty.
Zimbabwe has recently joined the list of countries that are embracing de-dollarization. Zimbabwe is introducing gold-backed digital tokens, starting from May 8, which can be used for payments and transactions with businesses in the country. The tokens’ value will be determined by international gold prices, with the aim of reducing Zimbabwe’s reliance on the US dollar and strengthening the country’s faltering currency. The tokens will be available to purchase via banks and transactions will be enabled through “e-gold wallets or e-gold cards” held by banks. The minimum spend for individuals to purchase digital tokens is $10, while financial institutions, corporates and other entities will have to spend $5,000.
De-dollarization is not an easy process for countries to undertake, as it often involves significant economic and political challenges. Here are a few reasons why:
- The US dollar is the world’s dominant reserve currency: The US dollar is still the most widely used currency in international trade and financial transactions, and it is held in large quantities by central banks around the world. This means that it can be difficult for countries to transition away from the US dollar without disrupting their international trade and investment flows.
- Alternative currencies may not be as stable or widely accepted: While there are alternative currencies that countries can use to reduce their reliance on the US dollar, such as the euro or the Chinese yuan, these currencies may not be as stable or widely accepted as the US dollar. This can create challenges for countries that are trying to build confidence in their new currency arrangements.
- Economic sanctions: Countries that are subject to US economic sanctions may find it particularly difficult to de-dollarize, as their access to international financial markets may be restricted. This can make it hard for these countries to find alternative sources of financing and trade.
- Political factors: De-dollarization can also be influenced by political factors, such as tensions between countries or concerns about the role of the US in the global economy. These factors can create resistance to de-dollarization efforts and make it difficult to build consensus among stakeholders.
Despite these challenges, many countries are still pursuing de-dollarization efforts, recognizing the potential benefits of reducing their dependence on the US dollar. However, it is important to note that de-dollarization is a complex and long-term process that requires careful planning, coordination, and stakeholder engagement.
Sources:
- “De-Dollarization: What It Means for the U.S. Economy and Global Power” by Ronald Soligo, Foreign Policy Research Institute, 2021.
- “Russia, China and De-Dollarization: A New Financial System Emerges” by Peter Koenig, Global Research, 2020.
- “De-dollarization: A Comprehensive Guide” by Anjali Verma, Harvard Political Review, 2019.
- “Zimbabwe introduces gold-backed digital currency as an alternative to the US dollar.” Quartz Africa, Mar 8, 2023.
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