The US is facing a potential challenge to the dollar’s dominance in global finance. Treasury Secretary Janet Yellen has warned that America’s heavy reliance on sanctions is pushing countries to look for ways to do business without using the dollar.
Sanctions Backfire?
Yellen explained that the US’s ability to freeze assets of countries through sanctions is a powerful tool, but it’s also driving other countries to find alternatives. She said, “The more we have used sanctions, the more countries look for ways to engage in financial transactions that don’t involve the dollar.”
This concern was highlighted after the US and its allies froze around $300 billion of Russian assets in response to the Ukraine invasion. Yellen believes these frozen assets should be used to help Ukraine rebuild.
A Shift in the Global Financial Landscape?
Yellen’s comments suggest that the US’s aggressive use of sanctions could have unintended consequences. If countries find ways to bypass the dollar, it could weaken the US’s economic and political influence.
It remains to be seen whether this trend will continue and how it will impact the global financial system. But one thing is clear: the dollar’s dominance is no longer a given.
