Morgan Stanley Sounds Alarm on US Dollar’s Dominance — Says Crypto Could Significantly Alter Currency Landscape

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Morgan Stanley has warned about the risk of the U.S. dollar losing its dominance, fueled by growing interest in digital assets, including bitcoin. Emphasizing that the U.S. dollar’s dominance “is being increasingly scrutinized,” the investment bank stated: “A clear shift towards reducing dollar-dependency is evident, simultaneously fueling interest in digital currencies such as bitcoin, stablecoins, and CBDCs.”

Morgan Stanley on Dedollarization Risk

Morgan Stanley published a report last week titled “Digital (De)Dollarization?” written by Andrew Peel, the investment bank’s executive director and head of Digital Asset Markets.

“The U.S. dollar’s dominance as the cornerstone of the international financial system is now being reconsidered in the face of evolving geopolitical shifts and the growing U.S. twin
deficits,” the executive said, adding:

Notably, the recent growth in interest of digital assets such as bitcoin, growth of stablecoin volumes, and the promise of central bank digital currencies (CBDCs), have potential to significantly alter the currency landscape.

He noted that the U.S. dollar’s dominance “is being increasingly scrutinized” as “Recent U.S. monetary policies, combined with the strategic use of economic sanctions, have prompted some nations to consider alternatives to the greenback.”

Meanwhile, “the European Union is actively working to bolster the euro’s role in international trade, aiming to provide a viable alternative to the dollar” and “China is advancing the yuan in international trade,” the director detailed.

The Morgan Stanley executive director further explained that inter-governmental organizations such as the BRICS economic bloc (Brazil, Russia, India, China, and South Africa), the Association of Southeast Asian Nations (ASEAN), the Shanghai Cooperation Organization (SCO), and the Eurasian Economic Union “are also expressing interest in using local currencies for trade invoicing and settlements.”

Noting that these organizations “collectively represent a significant portion of global GDP,” Peel stated that “some members have shown a willingness to trade in yuan, further indicating a shift in global currency dynamics.” He emphasized:

A clear shift towards reducing dollar-dependency is evident, simultaneously fueling interest in digital currencies such as bitcoin, stablecoins, and CBDCs.

Do you agree with Morgan Stanley about the risk of the U.S. dollar losing its dominance? Let us know in the comments section below.