Countries, particularly those in the Global South, are reducing their U.S. dollar reserves, settling cross border transactions in non-dollar currencies, and exploring the formation of new multilateral settlement mechanisms.

Photo taken on March 23, 2020 shows a U.S. dollar banknote in Washington D.C., the United States. (Photo/Liu Jie, Xinhua)

New York - Dedollarization appears to be an unstoppable trend as countries around the world look to reduce their dependence on the U.S. currency, said Eli Clifton, a senior advisor at the Quincy Institute, in an article posted on the website of Signs of the Times (SOTT) last week.

"A major driver is Washington's weaponization of its currency via sanctions, covering 29 percent of the global economy and 40 percent of global oil reserves," said the article.

Countries, particularly those in the Global South, are reducing their U.S. dollar reserves, settling cross border transactions in non-dollar currencies, and exploring the formation of new multilateral settlement mechanisms, it noted.

Two recent Responsible Statecraft articles, one authored by International Crisis Group co-chair Frank Giustra and another by Quincy Institute Non-Resident Fellow Amir Handjani, began the process of explaining the drivers of this economic trend, as well as the geopolitical pitfalls facing the United States as much of the world reduces its dependence on the dollar, especially if the United States fails to engage other countries in the process of forming a multilateral monetary system, according to the article.

"Giustra and Handjani make the case for the U.S. acknowledging the trend of dedollarization and for Washington to address the national security dangers, as well as global economic and political instability, associated with this unmanaged decline of U.S. economic hegemony," it added.