Dollar (USD), collapsing soon?..."Actually evolving into a digital hegemony system"

▲ US Dollar (USD)

Pessimism predicting the collapse of the global reserve currency, the dollar, is pouring out. However, instead of collapsing, the dollar is absorbing virtual assets and evolving into a new digital hegemony system.

Crypto-specialized YouTube channel Coinview diagnosed in a video uploaded on September 29 (local time) that while the dollar's share in global foreign exchange reserves decreased from 72% in 2001 to the late 50s, and central banks' gold purchases surged, the dollar's essential dominance has never disappeared. It explained that among the dollar's four core functions—commodity pricing, trade settlement, foreign exchange reserves, and global financial collateral—only the foreign exchange reserve function is being diversified with gold, and no single currency exists to replace it. Indeed, after the G7 froze Russia's central bank reserves of $300 billion in 2022, central banks' annual gold purchases exceeded 1,000 tons, but this is insufficient to replace dollar debt and the trade settlement network.

The structural stickiness, where dollar-denominated debt borne by non-U.S. borrowers worldwide amounts to $14.7 trillion and the dollar is involved in 88% of all foreign exchange transactions, is also a pillar supporting dollar hegemony. Even though the U.S. national debt has surpassed $40 trillion, U.S. Treasury bonds held by foreigners increased by 2.3% year-on-year to $9.3 trillion. It is pointed out that although various governments are building yuan settlement networks like CIPS or independent trade settlement channels, these are merely fragmented, inefficient networks that cause more costs and time delays.

Rather, the dollar's most powerful territorial expansion has occurred explosively within the private stablecoin ecosystem, not in Washington politics. Currently, 99% of the stablecoin supply, which is approximately $310 billion, consists of dollar-pegged stablecoins, and in February, the monthly settlement volume reached $7.2 trillion, surpassing global card payment networks for the first time. Private economies in emerging countries are voluntarily absorbing digital dollars, with 94% of Argentina's peso-denominated cryptocurrency transactions being stablecoins, and on-chain transaction volume exceeding $56 billion in Nigeria, where the value of its national currency, the naira, has plummeted.

This trend has created a remarkable phenomenon where private issuers like Tether have absorbed $141 billion in U.S. Treasury bonds, surpassing Germany, South Korea, and Saudi Arabia to become the 17th largest global holder of Treasury bonds. This is the background against which Treasury Secretary Scott Bessent and Senator Bill Hagerty have publicly declared their intention to solidify dollar hegemony through digital currency via the GENIUS stablecoin regulation bill. Meanwhile, in response to the declining trust in state-controlled currencies, Bitcoin (BTC) has increased its 90-day correlation with gold, establishing itself as a privately-led independent hedging tool.

The dollar is not dying, settlements are fragmenting, national treasuries are shifting to gold, and debt is tying the world together in a massive decomposition. While citizens worldwide fill their wallets with digital dollars and institutions prepare for declining trust with Bitcoin, the dollar system is leveraging virtual asset infrastructure to display an even more resilient vitality.

[Article Key Summary]

-Despite the decreasing share of the dollar in global foreign exchange reserves and the surging gold purchases by central banks, there is no single currency to replace the dollar.

-Dollar debt amounting to $14.7 trillion and stablecoins worth $310 billion have expanded the dollar's territory into the private economies of emerging countries.

-While Tether's large-scale purchases of U.S. Treasury bonds support dollar hegemony, Bitcoin (BTC) has emerged as a hedge asset against value erosion.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*