Digitized Currency Sparks Rebalancing of the International Monetary System

For decades, the US dollar has been the cornerstone of the global financial system, as it is used to price strategic commodities—particularly oil—and is used to settle most international trade and financial transactions. In addition, it is the primary currency for central bank reserves.

This presence of the dollar has permeated the daily life details of hundreds of millions of people around the world, from tourism and e-commerce to cross-border financial transfers.

However, in recent years, as geopolitical tensions have escalated, the scope of financial sanctions against major countries such as Russia and regional countries such as Iran has expanded, and trade wars have brought protectionist policies and tariffs back to the forefront, this reality has begun to show cracks.

These changes have prompted major economies such as China, the European Union, and the BRICS nations to seek alternatives to reduce their dependence on the US dollar.

Digital RMB: China's Strategic Bet

Since 2020, the People's Bank of China has been piloting digital RMB in selected cities, and has gradually expanded it to most parts of the country. Beijing hopes that this digital currency will strengthen monetary sovereignty and reduce reliance on the US dollar in international trade.

According to Reuters, as trade and customs policy volatility led investors to lose confidence in US assets, thereby increasing demand for the RMB, China reaffirmed its commitment to supporting a multipolar global monetary system and encouraged investors to shift funds from the dollar to Asian currencies and the euro.

Under this context, the People's Bank of China announced that it would implement an improved digital RMB management framework at the beginning of 2026, aiming to improve governance efficiency, expand usage, and stimulate adoption through additional incentives such as paying interest on digital balances.

Official data shows that by the end of last November, the transaction volume of digital RMB exceeded 16.7 trillion yuan (2.4 trillion U.S. dollars), reflecting a significant acceleration in the domestic popularity of the RMB and paving the way for further expansion of digital RMB overseas.

Will Digital RMB Break SWIFT's Monopoly?

The SWIFT system has long dominated cross-border transfers based on the US dollar, with settlements typically taking 3 to 5 days and requiring several intermediary banks, making them costly and complex procedures.

However, China has developed a cross-border digital settlement system based on digital RMB and blockchain technology, which can achieve instant settlement in seconds and reduce costs by 98%. The successful completion of a settlement between Hong Kong and Abu Dhabi without using SWIFT or intermediary banks is a manifestation of this transformation.

In 2025, China, in collaboration with the Bank for International Settlements and several central banks including the United Arab Emirates, Thailand, and Hong Kong, launched the "MBridge" platform.

This platform aims to support cross-border payments, reduce transaction costs, provide instant settlement, and strengthen the financial system. With more central banks joining the initiative, the platform is expected to grow further in 2026.

So far, the platform has completed thousands of cross-border transactions, totaling hundreds of billions of dollars, with digital RMB accounting for the largest share.

This step is not only important on a technological level but also extends to the geopolitical level, as it enables some countries to conduct transactions without being subject to American control and sanctions.

Digital Euro: Europe Defends Its Monetary Sovereignty

In Europe, there is growing concern about the increasing dominance of American companies in the digital payment sector, prompting dozens of experts to urge the EU to support the introduction of a digital euro. They warned that over-reliance on foreign platforms could weaken control over a key element of economic sovereignty.

The European Commission supports the European Central Bank's plan to introduce a digital currency before 2029, stating that the digital euro is not only a technological choice but also the "only defense line" to protect European financial stability and ensure the independence of monetary policy from American influence in the era of digital transformation.

BRICS Nations and National Currencies: Breaking the Monopoly

The BRICS nations consist of 11 member states, representing nearly half the world's population, and account for almost 40% of the global economy. These countries possess abundant strategic energy and mineral resources and are increasingly influential in the global economy.

According to a study published in the BRICS Economic Review, the BRICS nations are seeking to expand the use of their own currencies in regional trade, reduce dependence on the US dollar, and use their financial institutions, such as the New Development Bank, to provide financing in their own currencies.

Given China's economic strength, substantial investments, and extensive influence on member markets, China is the main driving force behind this trend.

Where Is the Global Financial System Headed?

Despite these changes, the dominant position of the US dollar seems unlikely to end in the short term, but it is entering an unprecedented testing phase. The introduction of the digital RMB by China, the BRICS nations' shift toward their own currencies, and Europe's attempts to launch a digital euro all indicate that the international monetary system is undergoing an increasingly strong wave of rebalancing.

Although these measures cannot yet completely replace the US dollar, they are shaping a more diversified global financial system in which monetary power will gradually be dispersed and may change trade and financial rules in the coming decades.

Source: Al Jazeera

Original: toutiao.com/article/1855007921487884/

Disclaimer: This article represents the views of the author.