 The dollarization, the end of the US dollar supremacy. There has been a lot of talk lately about an imminent decline of the US dollar as the world's reserve currency. Countries around the world are decreasing their dependence on the US dollar. New digital currencies are rising to challenge the US dominated fiat system. But is the decline of the US dollar really happening? And if so, how fast? And most importantly, what are the assets that could replace the dollar or at least benefit from its demise? We address all these questions in this video. Before we start, as always, don't forget to like the video, subscribe to our channel and turn on the notification bell to stay up to date with our next videos. I'm Giovanni Rost and this is a Cointelegraph Report. So first of all, what is a reserve currency? A reserve currency is a foreign currency that is held in large quantities by a country's central bank. The central bank uses it for carrying out international transactions and settling international debts and obligations. The US dollar is currently the world's dominant reserve currency, meaning the vast majority of international transactions happen via the US dollar. But the dollar hasn't always been the world's reserve currency. In modern history, there have been six major global reserve currencies. Their status depended on the global influence of the country that issued them. The British pound was the dominant currency for most of the 19th century, when the British empire's global influence was at its peak. It started to decline after World War I, which heavily impacted the British economy. On the contrary, the United States came out stronger from the war, and its status of global power was on the rise. With the Bretton Woods Agreement in 1944, the US dollar officially became the world's reserve currency. Since then, bilateral trade between most countries has been happening via the US dollar. The US dollar was fully backed by America's gold reserves until 1971, when President Richard Nixon abandoned the gold standard. From that point on, the value of the dollar would not be backed by gold, but just by faith in the US status as a global superpower and financial stability. Now let's fast forward to the present. In the last two decades, the US dollar's dominance as a reserve currency has been steadily declining. From representing about 70% of all global reserves in 2000, it is now down to less than 60%, and the trend continues to move in that direction. Now there are a few reasons for that. One is the emergence of other major currencies that are challenging the dollar as an instrument for international trade. Launched in 1999, the euro is currently the world's second largest reserve currency. Also, the rise of China as the world's second largest economy has boosted the U1 as an instrument for international transactions. But a major turning point happened last year, when the US imposed unprecedented sanctions on Russia as a response to the invasion of Ukraine. Russia lost access to $300 billion in its reserves, which were frozen by the US government and its allies. That sent a warring alarm to governments around the world, which became aware of the risk of defending too much on the US dollar. Since then, a number of countries not aligned with the US-led Western Bloc have been looking for alternatives to the dollar. Over this year, the U1 became China's main currency for cross-border transactions. The United Arab Emirates and India are exploring the use of rupees to trade non-oil commodities. Meanwhile, the BRICS nations are planning to create their own currency for international trade. To better understand this diversification trend, we talked to Zhong Yuan Zouiliu, a fellow for international political economy at the Council on Foreign Relations. What we are observing is actually the development of an alternative global financial and monetary or currency system that is not necessarily dominated by the US dollar or, for that matter, the US government. These activities, they started before Western sanctions against Putin and his regime. And now the big question, does all of this mean that the US dollar will really lose its status as a global reserve currency? To answer, we need to take a closer look at the potential competitors. The Euro, the second largest reserve currency, is still far from challenging the US dollar dominance, and it is not gaining any additional traction in international trade. Mainly, the reason is that the European Union is still perceived as a very much fragmented political entity within a certain future. The strongest contender to the dollar is probably the Chinese Yuan, considering the assent of China as a global power and the world's second largest economy. Still, China is an authoritarian country with very strict capital controls. That prevents the Yuan from becoming widely used in international transactions. China is the largest trading economy in the world since 2010. A lot of the Chinese policymakers complained about the mismatch between the rule of the renminbi as a yen international trade versus China's trading position. Finally, the British pound and the Japanese yen do not have the depth and liquidity to form the backbone of the world's financial system. Basically, no existing fiat currency has the characteristics to take over the US dollar's role as a world reserve currency. Some analysts see gold as the asset that will benefit the most from the de-dollarization process. Last year, the amount of gold bought by central banks increased by 152%. The reason for that is simple. Gold has a 5,000-year track record as a store of value and is seen as a safe heaven asset against geopolitical risk and high levels of inflation. To get a deeper understanding of this trend, we talked with senior commodity strategist at Bloomberg, Mike McGlone. I do think there's a churn trend for central banks to accumulate gold. I don't think that's going to stop. It's going to continue. That's partly as a response to the war and maybe is what people calling the US using the dollar as a weapon. I think gold's going to break out and go much higher. It's around $2,000 an ounce at the moment trading this at the end of May. And I think it's going to go to $3,000 an ounce. Another asset that could benefit from the de-dollarization process is, of course, Bitcoin. Bitcoin is often described as the digital version of gold because of its limited supply. Like gold, Bitcoin doesn't depend on any government, which potentially makes it an attractive asset for countries that want to diversify their reserves. The Salvador has been buying Bitcoin as part of its reserves after making it a legal tender in 2021. However, Bitcoin is a still nascent asset. It is highly volatile and widely perceived as risky. That still prevents major organizations and central banks from using it as a reserve asset. Eventually central banks will buy Bitcoin, but we're very far from that. It's just too small of a market, still very volatile for the central banks. The US dollars decline as a global reserve currency is definitely happening. It's a natural consequence of the increasing amount of challenges to America's status as a superpower. However, it will be a gradual process and at least at the moment it doesn't look like any other currency can replace the dollar. The most likely scenario would be the emergence of a more diversified system where a number of currencies and assets will be gaining share over the dollar as part of countries reserves and in international trade. As we saw, gold is already gaining traction. Bitcoin, which shares many of the characteristics of gold, will likely benefit from this process as well. It just needs time to mature and establish itself as a widely adopted mainstream asset. That's all for today's video, thank you for watching, I'm Giovanni your host, see you next time.