TEHRAN, July 10 — For decades, the architecture of global finance has rested on a single foundation: the US dollar. Officials and market analysts tracking the world’s monetary system note that this status, while deeply entrenched, is the subject of renewed scrutiny from rival powers, even as the dollar’s practical dominance remains overwhelming. The dollar’s role as the world’s primary reserve currency means it is the asset most widely held by central banks and major financial institutions for international transactions and as a store of value.
This arrangement, according to state and international reports, was formalized in the aftermath of World War II. The Bretton Woods Agreement of 1944 pegged other major currencies to the US dollar, which was itself convertible to gold at a fixed rate of $35 per ounce.
That system collapsed in 1971 when President Richard Nixon ended the dollar’s convertibility to gold. Yet the dollar retained its dominant position, sustained by the size and stability of the US economy, the depth of its financial markets, and Washington’s geopolitical influence. The account indicates that as of 2023, the dollar still accounts for roughly 58% of global foreign exchange reserves, according to the International Monetary Fund.
That figure, while a decline from earlier decades, still dwarfs the euro, which is the second most held reserve currency at approximately 20%. The Japanese yen, British pound, and Chinese renminbi trail far behind.
The dollar’s grip on actual trading is even more pronounced: the Bank for International Settlements reports that the dollar is used in about 88% of all foreign exchange transactions. For the United States, this arrangement confers what critics have long called an “exorbitant privilege.” Foreign demand for US Treasury bonds keeps American borrowing costs lower than they would otherwise be. It also allows the United States to run larger trade deficits without facing an immediate financial crisis.
There is a countervailing cost, however. Officials and economists note that a persistently strong dollar can hurt US exporters by making American goods more expensive in overseas markets. The historical record shows that challenges to dollar dominance are not new, but they have gathered momentum in recent years.
According to state and international reports, China has been pushing for the internationalization of the renminbi, though its share of global reserves remains modest. Beijing has also established an alternative payment system, the Cross-Border Interbank Payment System, known as CIPS, designed to offer an alternative to the dollar-dominated SWIFT network.
Meanwhile, discussions among BRICS nations about creating a common currency have periodically surfaced, though no concrete mechanism has yet emerged.
A Region Watching Closely
From this region, the implications of any shift in the reserve currency system are felt acutely. Iran, which has faced severe restrictions on its access to the dollar-based financial system due to US sanctions, has long sought alternatives. The account indicates that the creation of CIPS and the broader push for de-dollarization among certain trading partners have been watched closely in Tehran.
Yet officials here also recognize the practical obstacles. The liquidity of US financial markets and the rule-of-law protections they offer remain unmatched, factors that central banks and private investors are unlikely to abandon quickly.
The dollar’s continued strength is not merely a matter of market mechanics. It is also a function of geopolitical stability — or the perception of it. The United States, despite periodic political turbulence, still offers what many international investors consider the deepest and most reliable capital markets in the world.
No rival system, whether China’s or a potential BRICS mechanism, has yet demonstrated comparable depth or reliability.
What to Watch Next
Looking ahead, the trajectory of the dollar’s reserve status will depend on several factors. The pace of China’s financial liberalization, the credibility of alternative payment systems, and the political cohesion of BRICS nations will all play a role. So too will the policies of the current US administration.
President Donald Trump’s trade policies and his administration’s approach to sanctions and financial diplomacy could accelerate or slow the search for alternatives. For now, the dollar remains the world’s primary reserve currency by a wide margin.
But the account from the IMF and BIS data, combined with the observable efforts of rival powers, suggests that the question is no longer whether the system will change, but how gradually — and with what consequences for nations like Iran that sit outside the dollar’s inner circle.
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