Despite the economic cold war that has been waged between the west and the rest for the past six years, and attempts to dethrone the almighty dollar as the global reserve currency, USD retains the dominant share of international payments.

When Russia invaded Ukraine, western sanctions partially blocked their access to SWIFT, the forex wire service, prompting Russia to elevate the ruble for global oil and gas sales. Energy dependent countries had no option but to comply. Despite a massive initial drop in the value of the ruble, Russia weathered the storm as energy prices soared.

At the same time, China had been successfully operating their digital yuan in domestic markets, and had developed its own cross-border payment system known as CIPS. In support of Russia, China ramped up its cross-border tests of the digital yuan, signaling its long-desired ambition to challenge the dollar hegemony in international settlements.

By making the digital yuan (e-CNY) more portable, or freely convertible into dollar stablecoins, China was able to greatly increase its share of international payments from the 3% recorded in the early 2020s. This was a far cry from the euro’s 36% share, and the dollar continued to widen the gap to beyond 45% in the wake of EU economic weakness, as the war dragged on, and Europe was forced to import American gas.

But China’s biggest obstacle was its own balance of payments surplus. With over USD 3.5 trillion in foreign reserves – almost entirely held in dollars – China was symbiotically bound to the US financial system. China’s success relied on the dollar’s success, and vice versa.

Now, despite the currency cold war and the sovereign crypto adventures of e-CNY, the US dollar remains the world’s reserve currency of choice, and the standard for international payments. No-one, not even China, has managed to dethrone the king.