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## [TL; DR]
The United States dollar dominance is under threat due to the possibility of a BRICS’ proposed world reserve currency.

The freezing of Russia’s reserve worth around $300 billion and the removal of Russian banks from SWIFT has forced many countries to look for a new global currency. 

Several countries have adopted their local currencies when conducting bilateral trade rather than relying on the U.S dollar. 

The USD forecasts show a decline in its dominance over the several few years. 

## Introduction 
The United States dollar has been the dominant international currency since the end of the Second World War. Now, a year after the outbreak of the Ukraine war several countries have set a stage to explore other currencies, other than the United States dollar. Today, we explore currencies that may compete with the U.S dollar such as the Chinese Yuan. 

## Weakening of dollar’s global hegemony
At the beginning of this millennium 75% of the global currency reserves were in the form of the United States dollar. According to the International Monetary Fund that figure has decreased to 59% and it is likely to keep on falling. 

![](https://gimg2.gateimg.com/image/article/16817880351191681788002_.pic_hd.jpg)
United States dollar - Africom 

The momentum to reduce reliance on the United States dollar has increased following the sanctions imposed on Russia [following its invasion of Ukraine in 2022](https://www.gate.io/blog_detail/1020/Ukraine--Crypto--And-War--A-Bittersweet-Experience "following its invasion of Ukraine in 2022"). As part of the economic sanctions, western governments have frozen over $300 billion of Russia’s foreign currency reserves. The United States government has also expelled Russian banks from the SWIFT international payment system. 

Many countries, not just Russia and China, have condemned what they termed the weaponization of the United States dollar. Commenting on the current state of things regarding the international finance system Jason Hollands, managing director of investment platform Bestinvest said, “Countries willing to continue to trade with Russia, like India and China, have started doing so in rupees and yuan instead, triggering talk of the de-dollarisation of the international trading order.”

Read also: [Ukraine Receives Crypto Donations Amid War with Russia](https://www.gate.io/blog_detail/673/Ukraine-Receives-Crypto-Donations-Amid-War-with-Russia "Ukraine Receives Crypto Donations Amid War with Russia")

Various other countries have entered into bilateral agreements that enable them to use their local currencies when trading goods and services. For instance, Brazil and China have agreed to use their currencies when trading with each other rather than relying on the United States dollar as they used to.

Such moves are likely to weaken the global hegemony of the dollar as a reserve currency. Mr Hollands added, “However, the dollar is in a weaker position with moves by China, Russia, Saudi Arabia and Iran to move away from pricing and trading energy in US dollars.” 

Sadly, this development comes in the wake of the collapse of several United States banks such as Silvergate, [Silicon Valley Bank](https://www.gate.io/blog_detail/2303/svb-crash-caused-the-butterfly-effect-in-the-crypto-market-what-should-investors-do "Silicon Valley Bank") and Signature Banks. Although the key cause of the collapse of these banks is financial mismanagement, the continued spiking of Federal Funds rate in 2022 contributed to their’ financial woes. 

Read also: [Crashing Banks Push Crypto towards a bull market](https://www.gate.io/blog_detail/2397/crashing-banks-push-crypto-towards-a-bull-market "Crashing Banks Push Crypto towards a bull market") 

## China and Russia are building an alternative currency bloc
Probably the greatest threat to the global hegemony of the United States dollar is Russia and China’s establishment of an alternative currency bloc called BRICS. According to the Deputy Director of the Russian Foreign Ministry’s Foreign Policy Planning Department, Pavel Knyazev, [BRICs’ reserve currency alternative](https://www.silkroadbriefing.com/news/2022/10/04/brics-working-to-develop-a-new-reserve-currency/#:~:text=The%20new%20currency%20will%20be,and%20the%20South%20African%20Rand. "BRICs’ reserve currency alternative") will be based on the national currencies of its member states which currently include Russia, South Africa, India and China. 

![](https://gimg2.gateimg.com/image/article/16817881711201681788015_.pic.jpg)
BRICS member states - Russiabriefing 

The proposed basket of currencies comprises the Chinese RMB Yuan, the Russian Ruble, the South African Rand, the Indian Rupee and the Brazilian Real. Knyazev added, “The possibility and prospects of setting up a common single currency based on a basket of currencies of the BRICS countries is being discussed.”

Read also: [Depegging, Bank Runs and Unstablecoins](https://www.gate.io/blog_detail/2432/depegging-bank-runs-and-unstablecoins "Depegging, Bank Runs and Unstablecoins")

The historical statistics indicate that the United States dollar has depreciated against Brazilian Real and the Russian currency. On the other hand, the EURO has depreciated against all the currencies of the BRICS countries. The BRICS countries have said that they are creating a basket of currencies that will compete against the Western Financial system. 

Also, the various member countries of BRICS have increased the use of their local currencies when conducting their bilateral trades. 

## The Russian economy and the use of Yuan
Since the outbreak of the Ukrainian war, Russia has been increasingly using the Chinese Yuan. The Russian energy exporters are mainly paid in the Chinese Yuan. In addition, Russia's sovereign-wealth fund, a source of funds to support its war expenditure, is using Yuan. 

Read also: [Russia may use cryptocurrency in foreign trade](https://www.gate.io/blog_detail/848/daily-flash-russia-may-use-cryptocurrency-in-foreign-trade-since-2022-the-global-nft-trading-volume-has-increased-by-more-than-200 "Russia may use cryptocurrency in foreign trade")

Many companies in Russia are also borrowing the Yuan while the households are making their savings in the Yuan, also called renminbi. Interestingly, the China currency in Russia is strengthening the ties between the two countries. Russia started reducing its dependence on the United States dollar after its annexation of Crimea in 2014. 

## Countries that are distancing themselves from the United States dollar
Russia is not the only country that is working hard to create a new world reserve currency. 

### Brazil and China
Brazil and China have agreed to increase the use of their local currencies when they trade between themselves. This helps to bypass the United States dollar which they used in the past to settle most of their trade activities. This will help to reduce costs, enhance investment between the two nations and to promote bilateral trade. Notably, China is Brazil’s biggest trading partner with bilateral trade worth over $150.5 billion per year. 

### Saudi Arabia plans to ditch the United States dollar
Saudi Arabia has threatened to sell its oil in other currencies other than the United States dollar if the U.S passes a bill that exposes OPEC to its antitrust lawsuits. Saudi Arabia is the 10th biggest producer of oil and it competes with countries like China and the United States. Currently, the oil is denominated in the United States dollar. 

Read also: [The Indian Parliament passed crypto tax legislation](https://www.gate.io/uk/bitwiki/detail/886 "The Indian Parliament passed crypto tax legislation")

It has also threatened to liquidate its investment in the United States valued at more than $1 trillion. India and Malaysia have also agreed to use the Indian Rupee when trading between them. 

## Conclusion
The current global development shows that the dominance of the United States dollar is likely to decrease following various financial initiatives by other countries. BRICS aims to introduce its world reserve currency. Since many countries are adopting the Chinese Yuan it is likely to become the new world currency. 



<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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There is likely to be a new global currency as the US dollar slumps following several international initiatives to sideline it by adopting the Chinese Yuan and other currencies like the Indian Rupee, Brazilian Real and Russian Ruble.

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Dollar is falling: Dollar May Lose Strength as China and Russia Move to New Currency Bloc