ILLUSTRATION: KATMANDU JOURNAL
THE DOLLAR’S share of global foreign exchange reserves has fallen below 57% for the first time since 1995, according to the IMF’s COFER database. The decline from a peak of 72% in 2001 is structural. Central banks are buying gold at rates not seen in decades. BRICS nations hold summits to discuss alternatives. China has expanded its cross-border payment infrastructure. Russia and China now settle the majority of their bilateral trade outside the dollar entirely. If you read only the headlines, the world’s reserve currency is in terminal retreat.
Almost 90% of global foreign exchange transactions still involve the dollar. The Chinese yuan — the most discussed alternative, backed by the world’s second-largest economy — holds less than 2% of global foreign exchange reserves. These two facts sit alongside the headline numbers and don’t receive as much attention, because a currency still processing nine-tenths of global transactions makes for a less dramatic story than one declining from 72 to 57%.
That is where the serious analysis lives. The dollar’s reserve share has indeed declined by 15 percentage points over 25 years. At that pace, assuming it continues — a big assumption — the dollar would reach 42% of global reserves sometime in the late 2040s.
That is not the same thing as a reserve currency transition. Britain’s pound took some 30 years to transition from primary to secondary reserve currency, from the 1920s to the 1950s, and it was assisted by two world wars, as well as a collapse of the empire and the construction of the Bretton Woods system to install the dollar in its place. None of those conditions exist for a dollar replacement today.
The yuan’s share of global reserves remains under 3% despite China settling roughly half of its own foreign trade in its own currency. The paradox shows the problem. China can insist that its trading partners accept yuan for goods and services — and increasingly, particularly in commodity trade with sanctioned Russia, they do. Yet accepting yuan in payment is not the same as holding yuan as a reserve asset.
Holding a reserve asset requires confidence that you can sell it in large quantities quickly without moving the market; that the issuing country’s legal system will protect your claim; and that the asset will hold its value relative to what you will eventually need to spend it on. China’s capital controls, its managed exchange rate and the absence of a fully convertible bond market equivalent to the US Treasury market are the reasons central banks hold 2% of their reserves in yuan rather than 20.
Gold’s share of global reserves has leapt from 13% in 2017 to some 30% in 2025. The World Gold Council projects central banks will purchase 750 to 850 tonnes of gold in 2026. This is de-dollarization happening in a sense: central banks are moving away from the dollar without moving towards any other sovereign currency. Gold is politically neutral — it cannot be seized or sanctioned. After the United States froze Russia’s central bank reserves in 2022, every non-Western central bank studied its own exposure to that risk with new attention. The shift into gold is the most significant change in reserve management in decades, and it is not a move towards the yuan. Meaning it is a move towards an asset that belongs to nobody’s government.
The European Central Bank reported in June that the euro’s share across international currency indicators had increased moderately to around 20%. International issuance of euro-denominated debt increased by some 30% in 2025 and reached its highest level since the creation of the single currency. The euro has also become the leading currency in international green and sustainable bond issuance. If any currency is incrementally gaining from dollar diversification, it is the euro, rather than the yuan. Europe has a central bank, a shared monetary policy and deep liquid financial markets. The yuan has none of these at international scale.
What is acutally changing is the architecture. mBridge, the cross-border central bank digital currency platform developed with Chinese involvement, is moving from pilot to operational. CIPS, China’s dollar-free payment system, is expanding. BRICS nations are building the infrastructure for settling trade without routing it through the dollar-denominated SWIFT system. This is real, and its long-term significance is probably underestimated by those who point only to the yuan’s tiny reserve share.
But infrastructure takes time to build trust. The dollar’s network effects (from the fact that commodity contracts are priced in it and that shipping is invoiced in it to that most emerging-market sovereign debt is denominated in it) do not dissolve because an alternative settlement system exists. That happens when enough counterparties simultaneously decide to transact differently, which requires a coordination event that no BRICS summit has yet produced.
The transition from dollar exclusivity to dollar-centred competition is real. The transition from dollar dominance to dollar irrelevance is the story being written in the headlines and not yet in the data. ■
