Will financial innovation dethrone the dollar? - Financial Times

The question of whether financial innovation could eventually displace the US dollar is a recurring theme in policy and market circles. Recent advancements in blockchain technology, central bank digital currencies (CBDCs), and tokenized assets have renewed the debate. Proponents argue that faster, cheaper cross-border payment systems could reduce reliance on dollar-based infrastructure. Critics, however, point to the dollar's entrenched role in global trade, finance, and official reserves, which has historically shown resilience against new technologies.

Innovation alone has rarely dislodged incumbent reserve currencies. The dollar's dominance rests on deep liquidity, legal certainty, and network effects that are difficult to replicate. Still, the emergence of digital alternatives could accelerate shifts at the margins, particularly in regions seeking currency independence or facing sanctions exposure. The pace of adoption, rather than the mere existence of new tools, will determine the extent of any change.

For markets, the relevant signals are practical rather than rhetorical: the growth of digital currency corridors, the composition of central bank reserves, and the willingness of global institutions to settle trades outside dollar systems. Watching these structural trends offers a clearer read on the currency's long-term trajectory than headline debates alone.