If Donald Trump and Benjamin Netanyahu launched an attack on Iran, Iran reportedly responded by blocking the Strait of Hormuz. Now, there are claims that Iran is allowing only those ships to pass that either have special permission or are willing to pay a fee—a kind of toll that could go up to millions of dollars.
But here’s the catch: Iran cannot accept payments in US dollars due to sanctions. So how is this toll being paid? While nothing has been officially confirmed, reports suggest that some parties are paying in Chinese yuan. This hasn’t been verified, but it has certainly sparked speculation.
Once again, the debate has resurfaced—will the dominance of the US dollar decline? Is “de-dollarization” finally happening? It’s a big claim, and not something to be taken lightly. A temporary toll system alone won’t change the global trade currency overnight. However, the discussion keeps coming back because the dollar’s dominance is so strong that many countries both depend on it and resent it.
To understand the power of the dollar, look at another example. In February 2022, when Russia invaded Ukraine, the United States used a powerful financial weapon—it froze around $300 billion of Russia’s foreign reserves almost overnight. This move shook a major economy and showed that financial control can be as powerful as military force.
Today, over $60 trillion is traded daily in global markets, and nearly 85% of foreign exchange reserves are held in US dollars. Whether you buy oil from Saudi Arabia or microchips from Taiwan, payments are typically made in dollars.
But it wasn’t always this way.
There was a time when the US dollar had little to no value outside America—and even within the country, it wasn’t fully trusted. In the 19th century, multiple banks issued their own currencies, creating chaos. Thousands of different banknotes circulated, and their value varied from place to place. People relied more on gold than paper money.
In fact, during the 1800s, even American travelers struggled to use dollars abroad. They often had to exchange them at heavy discounts, while the British pound was widely accepted worldwide.
Over time, through financial reforms, crises, and global events like the Great Depression and World War II, the US strengthened its financial system. The creation of the Federal Reserve in 1913 and later policy decisions helped stabilize the dollar domestically.
Eventually, global shifts—especially after World War II—helped the dollar replace the British pound as the world’s dominant currency.
Today, the big question remains: Can China’s yuan ever challenge the dollar’s dominance? Many are watching closely, but for now, the dollar remains at the center of the global financial system.
By the end of World War II, Europe was in ruins. Britain, once the world’s largest economy, was financially exhausted. Its factories had been destroyed by bombings, and its treasury was nearly empty.
Meanwhile, across the Atlantic, the United States stood untouched. Not a single bomb had fallen on mainland America. As a result, by 1945, nearly 80% of the world’s gold reserves were stored in US vaults.
In this backdrop, a historic meeting took place in July 1944 at the Mount Washington Hotel in New Hampshire—the Bretton Woods Conference. Delegates from 44 countries gathered to design a new global financial system that could prevent another Great Depression and ensure smooth international trade.
Two powerful ideas clashed at this conference.
On one side was economist John Maynard Keynes, who argued that global trade should not depend on any single country’s currency. He proposed a neutral global currency called “Bancor.”
On the other side was Harry Dexter White, representing the United States. His argument was simple: America had the most gold and the strongest military—so the world should use the US dollar.
Keynes had logic. White had power.
And in geopolitics, power often wins.
The outcome? The US dollar was declared the world’s reserve currency. To build trust, the US promised that every $35 would be backed by one ounce of gold. Other countries pegged their currencies to the dollar, and the dollar was pegged to gold.
This made the dollar “as good as gold.”
For a while, the system worked smoothly. But by the 1960s, cracks began to appear.
The US was spending heavily—on welfare programs at home and the Vietnam War abroad. Instead of accumulating more gold, America started printing more dollars.
Normally, if a country prints too much money without backing, it leads to inflation and currency collapse. But the US was different. Why?
Because the entire world needed dollars.
Countries like Japan and Germany needed dollars to buy oil, steel, and other goods. So the global market absorbed the extra dollars. America could import real goods and pay with paper currency it printed at minimal cost.
France called this advantage an “exorbitant privilege.”
French President Charles de Gaulle wasn’t happy. In 1965, he demanded gold in exchange for France’s dollar reserves—and even sent ships to the US to collect it.
Soon, other countries followed. America’s gold reserves began to drain.
By 1971, the system was on the verge of collapse.
Then came a historic moment.
In August 1971, US President Richard Nixon announced that the US would no longer convert dollars into gold. This ended the Bretton Woods system overnight.
The dollar was no longer backed by gold—it became a fiat currency, valued purely on trust.
Initially, this caused chaos. But then came another turning point—the 1973 oil crisis.
The US struck a deal with Saudi Arabia:
- Oil would be sold only in US dollars
- Oil revenues would be invested in US assets
This created the “petrodollar system.” Now, every country needed dollars to buy oil—bringing back global demand for the currency.
The dollar regained its dominance.
The Dollar as a Weapon
Over time, the dollar became more than just a currency—it became a tool of power.
Through systems like:
- SWIFT (global banking communication)
- CHIPS (transaction clearing)
- Federal Reserve settlement systems
The US gained control over global financial flows.
For example:
- In 2012, Iran was cut off from the dollar system, crippling its economy
- In 2022, around $300 billion of Russia’s reserves were frozen
Without firing a single bullet, financial systems were used as weapons.
Why Doesn’t the World Abandon the Dollar?
Despite its risks, countries continue using the dollar due to:
- Network Effect: Everyone uses it, so it’s easiest
- Liquidity: Massive markets can handle huge transactions instantly
- Trust & Institutions: Strong legal and financial systems in the US
Challenges to the Dollar
There have been attempts to challenge it:
- The Euro (launched in 1999) showed promise but weakened after the Eurozone debt crisis
- China’s Yuan is rising, with digital currency and alternative payment systems
But replacing the dollar isn’t easy. A global reserve currency requires:
- Free capital movement
- Deep financial markets
- Global trust
Money can move freely across borders—but China doesn’t fully allow that. The Chinese Communist Party maintains strict capital controls. The currency is deliberately managed and often kept undervalued.
Chinese citizens cannot move large amounts of money خارج the country freely. Unlike countries like India, where capital movement is relatively more flexible, China imposes tight restrictions.
This creates a major concern for global investors. If someone invests billions in Chinese yuan and the government suddenly changes its policies, their money could get stuck inside China.
That’s one of the key reasons why—even though China is the world’s second-largest economy—the yuan’s share in global reserves remains very small, around 2.3% to 3%.
Compare that with:
- Japanese Yen: ~5.5%
- British Pound: ~4.9%
- US Dollar: ~58–59%
Even today, nearly half of global trade is settled in US dollars, while the yuan accounts for only about 4.5% to 4.7%.
China has been increasing trade in yuan with countries like Russia and Brazil, and its share has grown in recent years. For example, China is now paying for some Russian oil imports in yuan, and similar claims exist regarding Iran. But compared to the dollar, this is still a very small portion of global trade.
That said, things could change over time.
The US national debt has crossed $34 trillion, and the increasing use of the dollar as a geopolitical weapon has made several countries uncomfortable. At the same time, China’s growing economic power could gradually boost the yuan’s role in global trade.
However, the reality today is clear:
No other currency is in a position—at least in the near future—to replace the US dollar.
For that to happen:
- Europe would need a fully unified financial system
- China would need to remove capital controls and allow a free-floating currency
- And any challenger would need to match the dollar’s liquidity and global trust
Until then, the dollar’s dominance remains firmly intact.
That’s why “de-dollarization” is a very heavy term—and should not be used casually.
