The debate over the future role of the US dollar in the global financial system is gaining momentum as economic and political conditions continue to evolve.
Although the dollar remains the dominant currency in international trade, financial markets, and reserve holdings, a gradual trend toward diversification is emerging. More countries are exploring the use of national or alternative currencies in regional and bilateral settlements, driven by a desire to reduce dependence on a single currency and enhance financial resilience.
These shifts, however, are unfolding cautiously. The stability, liquidity, and institutional trust associated with the dollar continue to make it the most practical and widely accepted instrument for global transactions. By contrast, broader adoption of national currencies requires deep economic integration, robust financial systems, predictable macroeconomic conditions, and strong settlement mechanisms. Where these prerequisites are lacking, risks related to exchange-rate volatility, liquidity shortages, and settlement challenges remain significant.
As a result, the current trend is best described as a gradual diversification of the global currency landscape rather than a fundamental transformation. While the dollar’s share may slowly decline over time, it continues to occupy a leading position, with alternative currencies serving mainly as complementary tools within the international financial system.
News.Az explored the issue with Vugar Bayramov, economist and member of the Milli Majlis of Azerbaijan.
Photo: Vugar Bayramov, economist, member of the Milli Majlis of the Republic of Azerbaijan
According to Bayramov, a substantial portion of global currency reserves is still held in US dollars, a trend unlikely to shift in the near term.
“The dollar currently accounts for more than 65 percent of lobal currency reserves,” he said. “Both developed and developing countries continue to maintain the bulk of their reserves in dollars. It remains the main medium of payment in global trade.”
Bayramov acknowledged a slight increase in the share of other currencies within global reserve baskets but emphasized that this has not weakened the dollar’s overall position. “A sharp decline in the dollar’s share of global trade does not yet appear realistic,” he noted.
Despite efforts in some regions to encourage trade in national currencies, Bayramov said the broader picture remains unchanged: the dollar continues to dominate, including in regional trade. He added that widespread adoption of alternative currency mechanisms is unlikely in the near future, largely because the US economy remains one of the largest and strongest in the world.
“The dollar’s position in the global financial system is very strong. Opportunities for alternative currencies to challenge it remain limited. While its share may gradually decrease, this will not seriously undermine its status as the leading global currency,” Bayramov said.
He also highlighted that for small and medium-sized economies in particular, holding reserves in dollars and conducting international trade in the currency will remain a priority. “These countries are likely to continue giving preference to the dollar in the near future,” he concluded.
