The Geoeconomics of GENIUS

The preoccupation with US tariffs has diverted attention from global developments around digital currencies.

- AMITENDU PALIT

It is highly likely that tariffs will soon make way for digital currencies as the next geo-economic tool for global power projection. The US-China rivalry is acquiring a new dimension around digital currencies with significant implications for India and the Global South.

The US dollar has been the most important instrument in preserving the global economic hegemony of the US. As the leading reserve currency, the US dollar is the most popular currency for global trade invoicing and settling international payments. While nearly half of all global trade is invoiced in US dollars, around 90% of global foreign exchange transactions are carried out through the greenback.

Some recent developments might see lesser use of the dollar in global trade and foreign exchange transactions. These include the rising cost of procuring dollars for invoicing exports and imports. This has been a major problem for many countries from the Global South, including India. As a result, India and some other countries have been exploring options for settling bilateral trade in local currencies. While there is appetite for doing so, the inability to use local currencies for a wide variety of transactions constrains their use. Over time, as more and more countries, such as the BRICS group, focus on ways for doing trade in local currencies, there might be a reduction in the use of the US dollar.