2026 will be a year in which the decline of the US dollar—the quiet erosion of its global dominance as countries trade and pay in other ways—began to accelerate. The more Washington uses the dollar as a weapon, the more the world creates ways to avoid it.
America’s share of global trade has fallen from one-third in 2000 to one-fourth today. As emerging economies trade more, the dollar is subject to commodity movements. India’s trade with Russia is now in rupees, dirhams, and yuan. More than half of China’s trade now goes through CIPS, China’s cross-border payment system, instead of SWIFT—the global messaging network long run by Western banks. Other trade relations such as Brazil-Argentina, UAE-India, and Indonesia-Malaysia are also exploring local currency settlement.
At the same time, central banks around the world began to accumulate funds other than the dollar as a reserve currency. The dollar made up 72 percent of world reserves in 1999. Today, it’s down to 58 percent—and falling. Money is only safe if it is they have sinned for your safety. But opinions are changing.
The US fiscal deficit—estimated at $1.9 trillion by 2025—and the growing current account deficit, estimated at 6 percent of GDP, add pressure to the dollar. On top of this is the excessive use of the “printing machine,” which means the creation of large amounts of new money to finance spending. Having eroded the dollar’s “grand privilege” as the world’s leading reserve currency, these trends now raise questions about global confidence in the greenback.
Even the US Treasury market, once thought to be infinitely liquid and universally accepted as a pure security, has lost its luster. As of now, there are 27 billion dollars in US Treasury bonds—loans from investors to the government, backed by the full faith and credit of the United States—circulating in the global financial system. That means more bonds to trade, more to pay, more repos, and more to find on the balance sheets of the broker. But the big financial institutions like JPMorgan, Citi, and Goldman who were the main brokers of financing, have not grown accordingly. Meanwhile, if everyone wants to sell, there aren’t enough balance sheets to absorb the selling—unless the Fed steps in. This has been the case since the March 2020 Treasury market meltdown, which marked the historic failure of a liquid and reliable global market—US Treasuries—to operate during a crisis without central bank intervention.
In 2026, the real threat to the dollar may not come from a single rival currency. Instead, it will emerge from other payment and settlement systems designed to bypass dollar-based channels—especially in emerging markets that have never fully enjoyed the security of dollar liquidity or reliable access to dollar networks.
The race to design alternatives begins. One such approach is mBridge—a project in which central banks in China, Hong Kong, Thailand, and the United Arab Emirates are collaborating with the Bank for International Settlements to create a system that allows countries to settle one another instantly using digital versions of their national currencies. Another BRICS settlement, which would allow the BRICS+ countries—Brazil, Russia, India, China, South Africa, and their new members—to send each other trade and investment funds directly from their currencies. These are designed to make trading faster, cheaper, and less expensive.
