Will digital money reshape the dollar’s global dominance? |
Twice in the last century, the global financial system was forced to reinvent itself because the machinery underpinning money could no longer bear the weight placed upon it. The collapse of the gold standard during the Great Depression and the end of Bretton Woods in the early 1970s were not merely technical adjustments; they were systemic ruptures driven by shifts in power, trade, and capital flows. Today, the world stands at the edge of another such transformation. This time, however, the challenge is not centered on exchange-rate regimes or gold convertibility, but on digital infrastructure: the rails on which money itself now moves.
At the heart of this transformation lies a deceptively simple question: will the dominance of the US dollar survive the rise of digital money? Stablecoins, tokenized deposits, and central bank digital currencies (CBDCs) are rapidly reshaping how value is issued, transferred, and settled. Unlike previous transitions, this shift is not being negotiated through grand diplomatic conferences or formal treaties. It is unfolding from the bottom up, driven by technology, private innovation, and geopolitical competition over standards and systems.
To understand what is at stake, it is necessary to revisit how the dollar came to dominate global finance in the first place. In 1944, as World War II neared its end, Allied nations gathered in Bretton Woods to design a postwar monetary order. The agreement reflected the realities of power at the time: the United States emerged as the world’s leading industrial economy, held the bulk of global gold reserves, and possessed unmatched productive capacity. In exchange for stable exchange rates and access to dollar liquidity, other countries accepted constraints on their monetary sovereignty. The US dollar, convertible into gold, became the system’s anchor.
This arrangement worked for a time, but it contained the seeds of its own collapse. As global trade expanded and capital markets deepened, the supply of dollars needed to sustain growth far outstripped the US gold stock. Persistent US deficits, combined with rising foreign claims on dollars, eroded confidence in convertibility. In 1971, President Richard Nixon ended the dollar’s link to gold, ushering in the era of floating exchange rates. While many predicted that........