De-dollarization in the 21st Century: Global Trends and Emerging Patterns
DOI:
https://doi.org/10.84761/ttkkzx06Abstract
As the principal reserve currencies, medium of exchanged, and unit of account, the US dollar has long held a dominant position in the global financial system. Nonetheless, recent changes in the economy, technology, and geopolitics have sped up de-dollarization initiatives. This study explores the causes and effects of lessening dependency on the US dollar while looking at the changing nature of financial the de-dollarization from an international perspective. Geopolitical conflicts, like trade disputes and sanctions, are important reasons that have caused nations like China and Russia to look for alternatives. The financial landscape is also changing as a result of the emergence of regional currencies, technological advancements like central bank digital currencies (CBDCs), and the expanding economic power of emerging markets. Although de-dollarization has advantages including lower risk of exchange rates and improved monetary sovereignty, there are still many obstacles to overcome, such as the dollar's deeply ingrained network effects, liquidity constraints, and problems with international coordination. Ongoing initiatives to diversify currency reserves and payment systems are highlighted by case studies of Russia, China, and the BRICS countries. According to the paper's conclusion, the world's financial system is progressively shifting towards a more multipolar structure, even though the US dollar's hegemony is unlikely to be completely displaced anytime soon. This change requires stakeholders to adjust to a changing economic order and has significant ramifications for international trade, banking markets, and monetary policy. This article examines de-dollarization trends and the situation in India in light of this. Additionally, it highlights the government's efforts and attempts to support the rupee trade.