The End of Dollar Dominance ?

The year 2026 may not bring a sudden fall of the US dollar. But it could mark the moment when its quiet decline gathers speed. As the US increasingly uses the dollar as a tool of pressure, other countries are working harder to trade and pay without it.

America’s role in global trade has been shrinking for years. In 2000, it accounted for about one-third of world trade. Today, that share is closer to one-quarter. At the same time, emerging economies are trading more among themselves. As these links grow, the dollar becomes less central.

This change is already visible. India and Russia now settle much of their trade in rupees, dirhams, and yuan. China routes more than half of its trade through its own payment system, CIPS, instead of SWIFT. Other country pairs—such as Brazil and Argentina, India and the UAE, Indonesia and Malaysia—are also testing trade in local currencies.

Central banks are responding too. In 1999, the dollar made up about 72 percent of global foreign exchange reserves. Today, it is down to around 58 percent, and the trend is downward. A reserve currency works on trust. And trust depends as much on perception as on facts. That perception is changing.

Domestic problems in the US are adding to the strain. Government deficits are large and still growing, expected to reach nearly $2 trillion in 2025. The current account gap is widening as well. To cover these gaps, the US relies heavily on creating new money. For years, the dollar’s special status absorbed the shock. Now, that cushion looks thinner.

Even US government bonds no longer feel as solid as they once did. There are now more than $27 trillion worth of US Treasuries circulating worldwide. This means more bonds to trade, settle, and hold. But the banks that are meant to provide liquidity have not expanded fast enough. When markets come under stress, there are simply not enough balance sheets to absorb heavy selling—unless the Federal Reserve steps in.

This weakness was exposed in March 2020, when the Treasury market froze during a crisis and needed direct central bank support. It was a rare moment when the world’s safest market failed to function on its own.

Looking ahead to 2026, the biggest risk to the dollar is unlikely to be another currency replacing it. Instead, the threat comes from new payment systems that bypass the dollar altogether. This is especially true in emerging markets, where access to dollar liquidity has often been costly, slow, or political.

Several alternatives are already taking shape. One is mBridge, a project involving central banks from China, Hong Kong, Thailand, and the UAE, supported by the Bank for International Settlements. It aims to allow countries to pay each other instantly using digital versions of their own currencies. Another is BRICS Pay, which would let BRICS and partner countries settle trade and investment directly in their local currencies.

Then there are stablecoins. These digital tokens allow money to move across borders quickly and cheaply, without traditional banks. Most stablecoins today are linked to the US dollar, which actually strengthens its reach. But that may change. If stablecoins tied to multiple currencies—or not tied to the dollar at all—become common, they could offer a neutral way to settle global trade.

China is unlikely to challenge the dollar openly. Instead, it is likely to build around it. Yuan-linked stablecoins may spread through Hong Kong, the Gulf, and Southeast Asia. Some could be backed by commodities like gold or oil. These tools could be used to pay for ports, energy shipments, or infrastructure projects without using dollars or US banks.

Traditionally, it has taken hundred years for one global currency to replace another. But technology is speeding things up. Digital finance, new trade routes, and shifting power balances are shortening the timeline. The dollar is still dominant. But the cracks are clearer than before. And in 2026, the risk of slipping is higher than it has been in a long time.