The US dollar remains the world’s dominant reserve and business currency despite growing opposition from rivals like China and even some allies. Critics argue that Washington abuses its dollar supremacy, particularly through unilateral sanctions that entangle other nations. For instance, in 2014, French bank BNP Paribas faced penalties for processing dollar payments involving sanctioned countries like Cuba, Iran, and Sudan.
A recent study by economists Gordon Liao, Eswar Prasad, and Tony Zhang, published in Foreign Affairs, explores why the dollar has not lost its dominance despite these challenges. The authors highlight the paradox of dollar dominance, explaining how technology is both aiding and hindering efforts to shift away from the greenback.
The study underscores the reluctance of nations to embrace a multipolar monetary world, as doing so would bring significant consequences. While many countries and allies criticize dollar dominance, they remain hesitant to adopt alternatives, fearing the instability and uncertainty that could follow.