BCA Research finds the U.S. dollar likely to remain the central pillar of the global financial system for longer than many de-dollarization narratives suggest, even as its attractiveness as a reserve currency weakens over time.
The consultancy points to entrenched usage of the greenback across multiple financial layers - markets, payments and trade - and argues that entrenched network effects make a rapid move away from the U.S.-centric architecture difficult. Shifting reserve allocations can be done unilaterally by individual countries, but altering the currencies used for transactions in trade, banking and capital markets requires broad coordination among many participants, which constrains the speed of any change.
To quantify the dollar's global footprint, BCA developed a composite Dollar Dominance Indicator that measures the currency's role across five areas: official FX reserves; FX trading volumes; foreign-currency debt issuance; international banking claims and liabilities; and global payments and trade finance. Across this set of measures, the dollar still accounts for more than half of global usage, a share that substantially exceeds the United States' proportion of world GDP or global trade.
The analysis highlights where erosion of dollar dominance is most evident and where it remains resilient. The clearest decline has occurred in official reserve holdings. Since 2000, the dollar's share of global FX reserves has fallen as central banks - particularly in emerging markets - diversified into gold and a broader basket of non-traditional currencies. The 2022 freezing of Russian central bank assets accelerated that shift by underscoring the political risks associated with reserve assets that can be confiscated.
By contrast, dollar usage in market-based activity has stayed relatively stable. BCA reports that the dollar's share of global FX trading has climbed to about 89%. It continues to dominate foreign-currency debt issuance and remains the leading currency on international banking balance sheets. In global payments, the greenback accounts for roughly half of transactions and close to 80% of trade finance, reflecting its continued role as the vehicle currency for international commerce.
BCA frames the current dynamics as a prolonged transition rather than an abrupt regime shift. Even if central banks and official institutions progressively reduce holdings of dollar reserves, transactional reliance on the dollar - in trade, banking and markets - is likely to stay elevated. That combination will create a structural headwind for the exchange rate over time, while stopping short of a rapid loss of the dollar's global primacy.
Implications for markets and sectors
The persistence of dollar usage across trading, debt markets, banking balance sheets and trade finance affects currency markets, international banking, and global trade systems. The gradual erosion in official reserves may weigh on the exchange rate over the long run, while continued transactional reliance sustains demand for dollar-denominated instruments in markets and finance.