Global Reserve Currency Analysis: Structural Pressures on US Dollar Dominance in 2025

The Forbes article published November 5, 2025, at 10:03 AM EST [1] synthesizes ongoing structural pressures challenging US dollar dominance, positioning these developments within the context of 2025 trade and monetary policy dynamics. The analysis reveals a complex landscape where the dollar’s “exorbitant privilege” persists despite measurable erosion in its global reserve share over recent years [2][3].

The US dollar maintains its position as the primary global reserve and payments currency, supported by several critical pillars:

• Deep Treasury Markets
  : U.S. Treasury securities offer unmatched liquidity and depth, making them the preferred safe asset for central banks and institutional investors globally [3]
• Network Effects
  : entrenched dollar invoicing in international trade and correspondent banking creates self-reinforcing usage patterns [1][3]
• Scale Advantages
  : The United States represents the world’s largest consumer market, making dollar-denominated trade essential for export-driven economies [1]

Despite these advantages, IMF COFER data shows a measurable multi-year decline in the dollar’s share of allocated central bank reserves since 2000, with the trend continuing through 2025 [2][3].

Four primary forces are gradually reshaping the global monetary architecture:

1. Geopolitical Frictions
   : Trade tensions and sanctions incentivize nations to develop alternative payment systems and reduce dollar dependency [1][3]
2. Reserve Diversification
   : Central banks, particularly emerging markets, are systematically increasing gold purchases and non-USD asset allocations [3][7]
3. Digital Currency Innovation
   : CBDC development and cross-border payment pilots are creating potential alternatives to dollar-dominated settlement rails [4][5]
4. Trade Realignment
   : Shifting trade patterns and bilateral currency arrangements are gradually reducing dollar invoicing in certain regional trade flows [6]

China plays a uniquely complex role in the de-dollarization narrative. As the world’s largest exporter to the United States, China maintains pragmatic incentives to prevent sharp dollar depreciation, which would make US imports more expensive and potentially reduce American consumer purchasing power [1][6]. This creates a strategic balancing act where China simultaneously:

• Maintains substantial dollar asset holdings for FX management and export competitiveness
• Pursues gradual RMB internationalization through bilateral agreements
• Accumulates gold and alternative reserves as long-term hedges [3][7]

The US-China Business Council reports that China-US exports declined in the first nine months of 2025, reflecting ongoing trade realignment while maintaining substantial commercial interdependence [6].

The evidence points to incremental erosion rather than sudden replacement of dollar dominance. Historical analysis shows reserve currency shifts typically occur over decades, not years, with the dollar’s share declining by percentage points rather than experiencing collapse [2][3]. The structural barriers to creating alternative safe assets with comparable liquidity to U.S. Treasuries remain substantial [3].

Rather than a single replacement currency, the global system appears to be evolving toward greater multipolarity. This includes:

• Regional currency arrangements for specific trade corridors
• Increased gold holdings as neutral reserve assets
• Digital currency platforms for cross-border settlement
• Diversified reserve portfolios reducing single-currency concentration [2][3][4]

CBDC development represents the most significant technological challenge to dollar dominance. Projects like the European digital euro, Chinese digital yuan, and various cross-border pilots (Project Agorá, EUREP) are creating infrastructure that could eventually reduce friction in non-dollar transactions [4][5]. However, scalability and interoperability challenges limit immediate impact [4].

The increasing use of dollar-based sanctions creates incentives for alternatives while simultaneously reinforcing the dollar’s importance in global finance. Nations seeking to reduce sanction exposure must balance this against the practical necessity of dollar access for trade and finance [1][3].

• Accelerated De-Dollarization
  : Coordinated policy actions among major economies could accelerate reserve reallocation if perceived U.S. fiscal or monetary policy credibility deteriorates [1][3]
• Market Fragmentation
  : Development of competing payment systems and CBDCs without interoperability standards could create inefficiencies and increase transaction costs [4][5]
• Liquidity Disruptions
  : Any significant reduction in foreign demand for U.S. Treasuries could impact market functioning and borrowing costs [3]
• Trade Dislocation
  : Rapid shifts in invoicing currencies could create operational challenges for corporations and financial institutions [6]

• CBDC Leadership
  : Nations that successfully develop interoperable CBDC platforms could capture significant cross-border payment market share [4][5]
• Alternative Safe Assets
  : Development of non-dollar sovereign debt markets with sufficient depth could provide new reserve options [2][3]
• Fintech Innovation
  : Payment systems providers that solve cross-border currency conversion and settlement challenges could benefit from increased demand [4][5]
• Gold Market Expansion
  : Continued central bank gold purchases support market development and price stability [3][7]

The dollar’s dominance faces structural but gradual pressure from multiple sources. Current evidence through 2025 indicates measured change rather than abrupt transition. The deep liquidity of U.S. Treasury markets and entrenched network effects provide substantial resilience, while alternative systems develop incrementally [1][2][3].

Key monitoring indicators for the next 6-12 months include IMF COFER reserve allocation data, central bank gold purchase disclosures, major CBDC pilot milestones, and any significant changes in U.S. fiscal policy or Treasury market functioning [2][3][4].

The strategic calculus for major economies involves balancing diversification benefits against the practical necessity of dollar access for trade and financial stability. This suggests continued dollar primacy with gradually reduced market share and increasing multipolarity in the global monetary system [1][3][6].

This analysis is based on the Forbes article [1] and supporting research through November 2025. It provides information for decision-making support rather than investment recommendations.