Digital asset managers decisively oppose the integration of digital assets

Digital asset managers decisively oppose the integration of digital assets

In the world of global finance, the U.S. dollar has long held the position of dominant reserve currency. However, recent discussions have been centred around potential alternatives that could challenge this status quo.

Geoffrey Yu, senior EMEA markets strategist at BNY, suggests that other currencies will have to earn their higher status, with the dollar remaining the default currency for now. This sentiment is echoed by Massimiliano Castelli, head of strategy and advice at UBS Asset Management, who believes reports of the dollar's demise are exaggerated.

One proposed alternative is a multi-currency system featuring the Euro, Chinese Renminbi (RMB), Japanese Yen, and gold, as well as digital currencies like central bank digital currencies (CBDCs) and cryptocurrencies.

The Euro and RMB are widely discussed alternatives but face significant challenges. The Euro, being a major global currency with a stable financial market, is not yet a dominant reserve currency. The RMB’s international use has grown since its inclusion in the IMF’s SDR basket, but capital controls, convertibility limits, and geopolitical tensions have capped its share around 2% of global reserves.

Though historically significant, the Yen’s role as a reserve currency has declined relative to the dollar and Euro. It still plays a part within a diversified multi-currency reserve system, but is not currently positioned to replace the dollar broadly.

Gold remains a critical “safe haven” asset and central banks have been increasing gold holdings as a hedge against dollar volatility and geopolitical risks. While it cannot serve as a direct currency replacement, its role as a store of value and a potential backing for monetary systems is important.

Cryptocurrencies like Bitcoin and Ether are gaining institutional attention, but are not yet viable replacements for major reserve currencies due to volatility and regulatory uncertainty. However, CBDCs, especially the digital Euro and China’s e-CNY, are actively being developed to enable faster, lower-cost, and more sovereign cross-border payments without relying on the dollar. This digital technology could reduce dollar reliance and facilitate a more multi-polar reserve system.

The BRICS countries show interest in forming alternative financial infrastructures, including a possible supranational currency system or greater use of local currencies for trade. However, challenges around depository authority, legal frameworks, and internal power balance limit short-term feasibility.

Mark Sobel, US chair at OMFIF, writes that while the administration's actions may erode the currency's dominance, the dollar is not going anywhere soon. Jesper Koll, global ambassador and expert director, Monex Group, Japan, writes that de-dollarisation presents an opportunity for Japan to move closer to the limelight.

Despite the potential for cryptocurrencies to accelerate geopolitical shifts, it is not mentioned if they are a realistic alternative to the dollar. Pierpaolo Benigno and Edoardo Reviglio write that Europe has a strategic opportunity to develop its own safe asset. Aaron Hurd, senior portfolio manager at State Street Investment Management, writes that lower returns and higher risk mark a change in dynamics for the US currency.

OMFIF's Global Public Investor 2025 found that not a single central bank surveyed holds any digital assets, and 93% have no intention of doing so. Discussions about de-dollarisation fall short when it comes to finding a credible replacement for the dollar in cross-border transactions, according to Herbert Poenisch, senior research fellow at Zhejiang University.

In summary, a multi-currency reserve system combining the Euro, RMB, Yen, gold, and digital currencies is emerging as a more plausible post-dollar configuration. While cryptocurrencies may play a niche role, they lack reserve currency status now. Central bank digital currencies are likely to be more influential in a de-dollarized world by facilitating alternative global payment systems and reducing dollar intermediaries.

[1] OMFIF (2021). The Global Reserve Currency: The post-dollar configuration. [2] Benjamin, N. (2021). Key considerations for fostering a steady-state liquidity environment. [3] Castelli, M. (2021). Reports of the dollar’s demise are exaggerated. [4] James, H. (2021). The return of gold as a reserve currency. [5] Yu, G. (2021). The dollar remains the default currency.

1. Geoffrey Yu, senior EMEA markets strategist at BNY, posits that other currencies must earn a higher status, with the dollar remaining the default for now.
2. Massimiliano Castelli, head of strategy and advice at UBS Asset Management, concurs, stating that reports of the dollar's demise are overstated.
3. A multi-currency system, involving the Euro, Chinese Renminbi (RMB), Japanese Yen, gold, digital currencies like CBDCs and cryptocurrencies, is proposed as a potential alternative.
4. The Euro, despite being a major global currency with a stable financial market, has yet to become a dominant reserve currency.
5. The RMB’s international use has grown since its inclusion in the IMF’s SDR basket, but capital controls, convertibility limits, and geopolitical tensions have capped its share around 2% of global reserves.
6. Historically significant, the Yen’s role as a reserve currency has declined relative to the dollar and Euro.
7. Gold remains a vital "safe haven" asset, and central banks have been increasing gold holdings as a hedge against dollar volatility and geopolitical risks.
8. Cryptocurrencies like Bitcoin and Ether are gaining institutional attention, but are not yet viable replacements for major reserve currencies due to volatility and regulatory uncertainty.
9. CBDCs, especially the digital Euro and China’s e-CNY, are being developed to enable faster, lower-cost, and more sovereign cross-border payments without relying on the dollar, potentially reducing its dominance.

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