Concerns about de-dollarization — the loss of the US dollar’s role as the world’s hegemonic currency — have re-emerged recently due to a series of developments following the onset of Russia’s war against Ukraine. These developments range from the growing weaponization of the US dollar (USD or dollar), the continued decline in USD reserves, the growth in bilateral trade relationships denominated in non-dollar currencies, and the emergence of alternatives to the US-dominated international payments system, the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

We evaluate alternatives to replace the USD and find that no other currencies possess the required attributes of a dominant currency. The euro and the Chinese renminbi are the closest to satisfying the requirements of a dominant currency, but not nearly close enough to threaten the dollar’s hegemonic status. We show that the alternative of a multipolar arrangement without a dominant currency would be costly, and unlikely to survive as a stable equilibrium.

Thus, we conclude that the hegemonic role of the USD is likely to remain intact into the foreseeable future. That said, we recognize that the powerful geopolitical and economic forces at play today will continue to pose ongoing challenges to the dominance of the dollar, and that this story is far from over. We should remain vigilant in monitoring developments and be careful not to overlook future stresses, or to take the hegemonic status of the USD for granted.