The international monetary system is undergoing significant transformations characterized by the decline of unipolar dominance and the emergence of geopolitical rivalry. The global financial structure that has dominated since the Bretton Woods era, primarily anchored in the US dollar, is now encountering increasing challenges from emerging multipolar dynamics, technological advancements, and rising doubts regarding the viability of global financial interdependence. In this situation, the rivalry between currencies is not only an economic or financial issue, but also a very political and strategic one.
As the world moves into a time of economic decoupling, financial weaponization, and the spread of digital financial infrastructures, old ideas about currency hegemony are becoming less valid. The BRICS countries, with China in the lead and India, Brazil, Russia, and South Africa supporting them, have made big steps towards de-dollarization and monetary independence for institutions. Simultaneously, initiatives such as Central Bank Digital Currencies (CBDCs) and blockchain-based assets pose a threat to traditional monetary control mechanisms and global liquidity.
Currency competition is a complicated mix of economic, political, and geopolitical factors that happens all over the world. This competition is often a sign of bigger fights for power and influence between countries, which are shown by the strength of their currencies and their roles in the global financial system. Currency competition and wars are just signs of bigger economic problems, since currencies are just tools for trade.
Competition between states generally takes two forms: power competition, which is shown by military strength, and economic competition. The first one is only for big countries with lots of land and people, like the US, Russia, and China. On the other hand, economic competition is more open, which lets smaller countries like Switzerland, Japan, Turkey, and the United Arab Emirates take part in regional or global economies. The United States and China are examples of superpowers because they can compete in both ways (Mearsheimer, 2014).
The current economic order is fragile, as shown by record-high levels of global debt, which reached $307 trillion or 336% of global GDP in Q1 2025 (IIF, 2025). This shows how complicated financial governance is becoming. Daniel Dăianu (2018, pages 159-180), in his study “Central banks’ dilemmas in Central and Eastern Europe (CEE)” published in Journal for Economic Forecasting, Institute for Economic Forecasting, succinctly states, “Central banks are overburdened and can no longer rely on decisions based on very simple rules. The boundaries between monetary policy and quasi-fiscal operations, other economic policy instruments are being blurred, especially when the issue of financial stability becomes paramount.” The lines between monetary policy and quasi-fiscal operations, as well as other economic policy tools, are becoming less clear, especially when financial stability is the most important thing. States are finding it harder and harder to make decisions because of growing systemic risks like shadow banking, capital market volatility, income inequality, technological disruptions, and climate change. Wars and geopolitical tensions make currency competition even more important, since currency can be used as both an economic and strategic weapon (Eichengreen, 2011).
The US dollar (USD) is still the most important part of the global financial system. As of June 2025, it made up more than 58% of all international transactions (IMF, 2025). This shows how powerful the US economy is, but its dominance is being challenged by de-globalization and the rise of competing economic blocs (IMF, 2023). The euro is a strong competitor, but its structural problems make it hard for it to fully compete with the US dollar.
Right now, the fight against inflation is the most important thing in the world economy. This is making central banks use stricter monetary policies (Rogoff, 2022). The United States has a very strong economy, even though it has a lot of debt. This is partly because it is the only country that can issue the world’s main reserve currency, which supports more than 60% of all international transactions (Bordo, 2019). In 2025, the US dollar is still the most important currency in the world, but its status has changed a little by 2025.
Reserves in foreign exchange. About 58% of the world’s official foreign exchange reserves are in U.S. dollars. This is a slow drop from the peak of over 70% in 2000, but the dollar is still by far the most important reserve currency. The euro comes in second, with a share of about 20%. Central banks have been adding more and more currencies to their reserves. The Chinese renminbi, in particular, has gained ground at the expense of the dollar.
Transactions between countries. The dollar is still very important in trade and finance around the world. It is involved in about 88% of all foreign exchange transactions and sends out more than half of all international trade invoices. As of early 2025, it made up about half of all payments that went through the SWIFT network.
Strength at the Core. The dollar will stay strong because the U.S. economy is big, its financial markets are deep and liquid, and its legal and institutional framework is strong. There are still arguments about “de-dollarization,” especially ones pushed by Russia and China, but no viable or equally stable alternative has been found yet. Because of this, the dollar will likely stay the world’s main reserve currency for a long time.
The US can use its currency to get geopolitical and economic benefits because of its unique position. But China and other Southeast Asian economies own a lot of US Treasury bonds, and if they sold a lot of them, it could make financial markets unstable, raise interest rates, and hurt economic growth.
A lot of countries are in a dangerous situation right now because they rely so heavily on the US dollar for their reserves and debts. Sanctions against Russia have sped up the work of countries like China and Saudi Arabia to find other ways to protect themselves from the same kinds of problems (Klein & Pettis, 2022). The use of currencies other than the petrodollar for oil payments may make alternative currency systems more stable, liquid, and long-term viable, especially in BRICS countries.
The emergence of central bank digital currencies (CBDCs) adds complexity, potentially solidifying global dependence on either the US dollar or the Chinese yuan (Auer & Böhme, 2021). Alternatives like a gold-backed monetary system, cryptocurrency-based reserves, or a currency basket proposed by BRICS are still mostly guesses and have big economic and structural problems to deal with.
Because of the factors mentioned above, it’s important to do a thorough analysis of current monetary trends, possible future developments, and how they will affect both the global and local economies. The euro is the second most widely used currency in the world for international transactions and reserves. It is at the center of the competition between currencies. But it doesn’t work as well because the EU relies on the US for security and on China and other BRICS countries for goods, energy, and resources. Also, the euro’s role in global monetary competition is more difficult by the fact that EU member states have different levels of economic development. For example, Germany and the Nordic countries are much more developed than Southern and Eastern Europe (De Grauwe, 2018).
The US dollar and the Chinese yuan were not in direct competition until recently because the yuan was not a reserve currency. But in the last few years, China’s strategic financial policies and greater involvement in global trade settlements have made currency competition even stronger (Subacchi, 2020). As the EU figures out what it should do in this changing world, it’s important to know what it means for the euro area, especially for countries like Romania that want to join the euro soon.
Author: Marius Comis