By Andrea Hargraves 
The dollar’s role as the dominant currency in the international financial system could be eroded by sanctions against RussiaI read it in an interview with the Financial Times. Deputy Managing Director of the International Monetary Fund, Gita Gopinath. The world could reorganize itself into separate blocks in which a single currency is dominant, fragmenting what was once dominated by the US currency. The renminbi (Chinese currency) and cryptocurrencies could see their adoption accelerate with the war.
He said the sanctions, which involve freezing the Russian Central Bank’s reserves abroad, could “push” countries into another reserve currency. Russia owns a fifth of dollar-denominated reserve assets, many of which are in countries such as France and the United Kingdom, and is currently imposing sanctions on the country.
“The dollar will continue to be the main global currency, even in this scenario. But a smaller scale fragmentation is of course possible (…). And we are already seeing that in some countries they are renegotiating the currency in which they are paid in the trade that they are doing,” he said. For the British newspaper in an interview published on Thursday, March 31.
With regard to cryptocurrencies and the creation of digital currencies by central banks, known as central bank digital currencies, these currencies “are receiving increased attention due to recent cases, which leads us to the issue of international regulation, a gap that needs to be filled,” he said, referring to to me Russian citizens use cryptocurrency to circumvent sanctions.
“Countries tend to accumulate reserves of the currencies they trade in the rest of the world, in which they demand credit from the rest of the world,” which would cause currencies such as the Australian dollar and the Chinese renminbi to be used as reserve currency by central banks around the world. However, despite the fact that the percentage of international reserves in dollars has fallen from 70% to 60% in 20 years, the share in the renminbi has been less than 3%. In the near future, according to Gopinath.
In order to become more dominant than the dollar, the renminbi must ensure “full convertibility, have open capital markets and the institutions that support it,” he said.