The international financial world is abuzz with recent news.
Saudi Arabia, the oil giant, has quietly joined the Central Bank Digital Currency (CBDC) cross-border trial project, the Multiple CBDC Bridge (mBridge), led by the Bank for International Settlements and China.
This move has sent shockwaves through global financial markets.
As a major player in global oil trade, Saudi Arabia's decision has raised widespread questions about the dominance of the US dollar.
Does this move signal an unprecedented challenge to the dollar's supremacy?
The digital currency bridge is more than a simple cross-border payment platform.
It is, in fact, a platform for trading central bank digital currencies from multiple countries, facilitating direct transactions between them.
This means that future trades of oil and other commodities may no longer need the US dollar as an intermediary but can be settled directly using each country's digital currency.
This represents a profound shift for the oil trade system, which traditionally relies on dollar settlements.
Along with Saudi Arabia, countries like Iran, Egypt, Ethiopia, and the UAE have also joined this project.
These countries account for 43.1% of global oil production and hold 44% of the world's oil reserves, making them highly influential in the international oil market.
If they choose to use digital currencies for oil transactions, it will significantly impact the dollar's role in oil trade.
In addition to the digital currency bridge, the dollar's position is also threatened by the tech bubble in the US stock market.
In recent years, the stock prices of major tech companies like Meta, Microsoft, and Nvidia have soared, lifting the entire market.
However, this apparent prosperity hides substantial risks.
The expansion of the tech bubble is often accompanied by excessive speculation and blind optimism among investors.
Once market confidence wavers and the bubble bursts, a sharp decline in tech stocks will be inevitable.
The bursting of the tech bubble would severely impact the US stock market, with the resulting wealth contraction triggering a chain reaction and causing economic turmoil.
In such a scenario, the stability of the dollar as the global reserve currency would be called into question.
A significant drop in the US stock market would weaken global investors' confidence in the dollar, further eroding its international standing.
Moreover, the rising debt risk in the US poses another threat to the dollar's dominance.
The US is already the world's largest net debtor, with a negative net international investment position of $18 trillion.
This unbalanced economic structure puts enormous pressure on the US economy.
High levels of debt not only increase the government's fiscal burden but also undermine investors' confidence in the US economy.
The petrodollar system is gradually disintegrating.
As the US has become one of the world's largest oil producers, its demand for imported crude has significantly decreased, challenging the petrodollar's status.
Historically, oil transactions were almost exclusively priced and settled in dollars, providing a solid foundation for the dollar's international position.
However, with fluctuating oil prices and shifts in the energy landscape, more countries are exploring diversified settlement currencies to reduce reliance on the dollar.
In particular, the cooperation between Middle Eastern oil-producing countries like Saudi Arabia and China has accelerated the breakdown of the petrodollar system.
These countries plan to use the Chinese yuan for settlements and adopt digital payment methods, which not only enhances settlement efficiency but also reduces the demand for dollars.
As these countries gradually abandon the petrodollar system, the dollar's role in global oil trade will face further challenges.
In this context, a new monetary landscape is gradually emerging.
On one hand, the rise of digital currencies provides central banks with new settlement methods, speeding up the diversification and convenience of monetary settlements.
On the other hand, some emerging market countries are actively seeking to establish their own monetary systems to reduce dependence on the dollar.
Nevertheless, the dollar's hegemony remains strong.
The dollar's entrenched position as the world's primary reserve currency and international transaction currency remains unmatched.
Global commodities and international trade are still primarily priced and settled in dollars, giving the dollar an irreplaceable status in international markets.
Additionally, the US economy remains robust, with a significant share of global GDP and a leading technology industry, all of which strongly support the dollar.
The future monetary landscape will be more diversified and complex.
With continuous technological advancements and global economic development, the rise of digital currencies offers new settlement methods that may transform the traditional monetary system.
Emerging market countries are also actively exploring the establishment of their digital currency systems to reduce dollar dependency.
Saudi Arabia's involvement in the digital currency bridge project, the expansion of the tech bubble, and the disintegration of the petrodollar system are all factors challenging the dollar's status.
The future evolution of the monetary landscape remains uncertain, and central banks and financial markets must remain vigilant and flexible in response.
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