Kevin Helms
A student of Austrian economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of finance and cryptography.
Analyst – Finance Bitcoin News
Fitch Solutions’ global head of country risk has named the growing use of cryptocurrencies, de-dollarization efforts by the BRICS countries and China’s growing “economic power” as key factors eroding the US dollar’s dominance over time. He warned that China will “exercise more influence in global financial institutions and trade.”
Analysts explain why the US dollar’s dominance is at risk
Fitch Solutions’ global head of country risk, Cedric Chehab, explained why the US dollar’s dominance is waning in an interview with CNBC on Sunday. Fitch Solutions provides financial information services; it is a division of the Fitch Group which includes Fitch Ratings, a global leader in credit rating and research.
The analyst explained that “Any reduction in the status of the US dollar will be a slow erosion rather than a paradigm shift,” adding:
We will see the dollar dominance erode over time.
Chehab cited three main reasons why USD dominance is eroding. The first concerns China. He elaborated: “China is the largest trading partner in most economies, and as its economic power continues to increase, it means it will exert more influence in global financial institutions and trade, etc.”
Secondly, he explained that more economies want to diversify. Russia, for example, has been trying to disengage from the US-led financial sector, he described, noting that the sanctions imposed by Western countries have accelerated the effort. Chehab also mentioned the BRICS bloc and ASEAN countries making similar efforts to reduce dependence on the US dollar. BRICS consists of Brazil, Russia, India, China and South Africa. They are reportedly working on creating a new type of currency that will reduce their dependence on the US dollar. The ASEAN countries include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The Fitch Solutions analyst also pointed to central bank digital currencies (CBDCs) and cryptocurrencies as the third reason. Noting that they are “less talked about,” he warned:
We will essentially see, perhaps, less use of general currencies. It will affect the US dollar.
Do you agree with the Fitch Solutions analyst? Let us know in the comments section below.
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