A New Financial Order
Guest author Ewan Markson-Brown on Bitcoin’s role in the shift from dollar dominance to digital networks, and a future path to détente
Introduction: Historical Context Meets Digital Evolution
From Bretton Woods to Bitcoin, global finance is witnessing the most profound transformation since the mid-20th century. For decades, the U.S. dollar has dominated international finance, rooted in the 1944 Bretton Woods Agreement and strengthened by systems like Eurodollars and petrodollars. In the 21st century, decentralized technologies are challenging this supremacy. Bitcoin, hailed as “digital gold,” and USD-pegged stablecoins like USDC, are redefining how value is stored and transferred, how trade and credit are financed, and perhaps the very foundations of the monetary order.
Bitcoin emerged in 2009 as a response to the Global Financial Crisis, offering a decentralized, government-independent store of value. Meanwhile, stablecoins have rapidly integrated into decentralized finance (DeFi), bridging fiat and crypto systems while paradoxically reinforcing the dollar’s dominance within blockchain networks.
These innovations carry profound implications. Emerging markets, often lacking robust financial infrastructure, are leveraging these tools to address systemic vulnerabilities. Simultaneously, geopolitical shifts—such as the reliance on SWIFT sanctions—are pushing nations like China and Russia to explore alternatives, including decentralized finance.
Bitcoin and stablecoins won’t replace the dollar but mark a new phase of financial evolution—one driven by market dynamics over political control. This report explores:
The historical roots of dollar dominance,
The transformative potential of Bitcoin and stablecoins,
Their geopolitical and market implications, and
Strategic insights for investors and policymakers.
II. The Legacy of Dollar Hegemony: A Political and Market Overview
The U.S. dollar’s dominance is both a historical inevitability and a strategic construct. After the Bretton Woods Conference in 1944, the dollar became the world’s reserve currency, anchored by its convertibility to gold and the United States’ post-war economic strength. As nations pegged their currencies to the dollar, the U.S. assumed the role of the world’s banker, with the dollar as the primary medium for trade and investment. Even after the Nixon administration severed the dollar’s link to gold in 1971, ushering in fiat currency, the dollar retained its supremacy — buoyed by the petrodollar system and the deep liquidity of the Eurodollar market.
Challenges of Dollar Dependency
However, this dominance has not come without costs or controversies. For emerging markets (EMs), reliance on the dollar exposes them to:
Exchange rate volatility and capital flight, especially during periods of Federal Reserve tightening, as seen during the Volcker Shock of the 1980s and more recently in 2022.
Procyclical effects of U.S. monetary policy, which can raise borrowing costs and destabilize local currencies.
Debt vulnerabilities, as most EM external obligations are denominated in dollars.
Sanctions and confiscatory risks, most recently seen in the seizure of Russia assets
Despite these vulnerabilities, nearly 60% of global foreign exchange reserves remain denominated in dollars, according to 2023 IMF data.
Geopolitical Implications
The U.S.’s use of SWIFT sanctions has weaponized the dollar, alienating key trading partners and accelerating the search for alternatives. Initiatives like China’s Cross-Border Interbank Payment System (CIPS) and discussions of a BRICS common currency reflect efforts to reduce dollar reliance. Yet, trust deficits and network effects make these alternatives less feasible for now.
As technological innovation challenges traditional systems, a critical question emerges: can the dollar evolve from a politically controlled tool to one driven by decentralized, market-driven networks? This leads us to Bitcoin and stablecoins.
III. Bitcoin and Stablecoins: A New Paradigm in Digital Finance
Bitcoin: The Rise of “Digital Gold”
Introduced in 2009, Bitcoin operates on a decentralized, peer-to-peer network where transactions are recorded on a public ledger—the blockchain. With its capped supply of 21 million coins, Bitcoin offers a scarce, apolitical asset resistant to inflation and political interference.
In emerging markets like Venezuela, Turkey, and Zimbabwe, Bitcoin adoption has surged as citizens seek refuge from hyperinflation and currency devaluation. El Salvador’s adoption of Bitcoin as legal tender in 2021 reflects its potential to reduce remittance costs and increase financial inclusion. However, Bitcoin’s volatility remains a challenge, limiting its use as a daily currency while strengthening its appeal as a store of value.
Notably, Bitcoin is shifting from adoption in weaker jurisdictions to stronger ones. Discussions of strategic Bitcoin reserves in the U.S., Brazil, and other nations suggest a growing acknowledgment of its role in global finance.
Rapid Adoption in Emerging Markets: The S-Curve Acceleration
Emerging markets are poised for rapid adoption of digital assets, driven by a confluence of structural vulnerabilities, growing technological penetration, and the legitimization of cryptocurrencies by major economies like the United States. Historically, the adoption of transformative technologies follows an S-curve pattern: early scepticism gives way to rapid acceleration once institutional and regulatory frameworks validate their utility. Just as mobile phones leapfrogged traditional landlines in EMs, the legitimization of Bitcoin and stablecoins by the U.S. could act as a tipping point, propelling widespread adoption in these regions.
For emerging markets, where financial inclusion remains a challenge, digital assets offer low-barrier access to global financial systems. The legitimization of crypto assets by U.S. regulatory bodies would not only mitigate the stigma associated with their use but also encourage local policymakers and institutions in EMs to integrate them into mainstream financial frameworks. Historically, U.S. endorsement of financial innovations—from the dollar’s role in global trade to the adoption of credit cards—has catalyzed rapid international adoption, particularly in regions seeking modern, scalable solutions. With a bottom-of-the-S-curve dynamic currently in play, the legitimization of crypto could lead to exponential growth in adoption, especially in areas where traditional financial systems have failed to meet demand.
Stablecoins: Digital Dollars for a Global Economy
Stablecoins, pegged to fiat currencies like the U.S. dollar, address the volatility challenges of cryptocurrencies. Assets like USDC, Tether (USDT), and Binance USD (BUSD) maintain their value through reserves or algorithms, facilitating faster, cheaper cross-border payments and powering DeFi applications like lending and trading.
In emerging markets:
Argentina: Residents use USDT to shield savings from the peso’s inflationary pressures.
Nigeria: Stablecoins have become essential for trade and investment amid restrictions on foreign currency access.
Stablecoins paradoxically reinforce dollar dominance by embedding the greenback into blockchain networks, extending its relevance in digital finance.
Bitcoin and Stablecoins: Complementary Roles
Together, Bitcoin and stablecoins offer a complementary paradigm:
Bitcoin serves as a decentralized store of value.
Stablecoins provide liquidity and transactional stability.
This dual role addresses two critical pain points in EMs: lack of trust in local currencies and inadequate access to global financial systems. However, regulatory uncertainty, transparency concerns around stablecoins, and the misuse of cryptocurrencies pose significant challenges.
IV. From Political Power to Network Effects
The digital era marks a shift in the dollar’s dominance from political enforcement to market-driven network effects. Network effects, where the value of a system increases with its user base, are evident in the widespread adoption of dollar-pegged stablecoins within DeFi platforms.
The Dollar’s Evolution
Stablecoins embed the dollar into decentralized systems, enabling seamless cross-border transactions and reinforcing its liquidity. Unlike politically driven mechanisms like SWIFT sanctions, these networks foster organic adoption, making dollar dominance less contentious for emerging powers.
Bitcoin’s Decentralized Counterbalance
Bitcoin, while complementary to stablecoins, offers an alternative. As a politically neutral asset, it challenges traditional monetary sovereignty while reinforcing the dollar indirectly through stablecoin-denominated trading pairs.
V. Geopolitical Détente: A Path for the BRICS and the U.S.
The integration of Bitcoin and stablecoins presents an opportunity for détente between the U.S. and emerging powers:
Stablecoins as Bridges: BRICS nations could adopt dollar-pegged stablecoins to facilitate trade, bypassing traditional banking systems while maintaining dollar liquidity.
Bitcoin as Reserve Assets: Diversifying reserves with Bitcoin could reduce reliance on the dollar without destabilizing existing systems.
Shared DeFi Infrastructure: Collaborative efforts could reduce geopolitical tensions by decentralizing control over financial networks.
For the U.S., embracing digital finance could extend its influence while adapting to a decentralized global order.
VI. Conclusion: A Subtle Yet Meaningful Shift
The rise of Bitcoin and stablecoins signals not the end of dollar dominance but its evolution into a network-driven era — one where technology, markets, and network effects, rather than politics, shape global finance. Emerging markets, positioned at the bottom of the S-curve, are poised to drive exponential adoption of digital assets. The legitimization of cryptocurrencies by major economies like the U.S. could serve as the tipping point, accelerating this transformation by fostering trust and creating a regulatory framework that enables both global and local adoption.
For the U.S., regulatory clarity and support for innovation will ensure the dollar's continued relevance in a decentralized world, while emerging markets stand to benefit from tools that address financial inclusion and systemic vulnerabilities. Together, these dynamics offer a path toward a more balanced, inclusive, and resilient global financial order.