Dollar Hegemony 3.0: Trump’s “Decentralized” Grand Strategy

On Thursday, January 23, 2025, under the guise of “protecting economic freedom,” Donald Trump signed an executive order banning the development of a U.S. central bank digital currency (CBDC) while endorsing privately issued stablecoins. At first glance, this decision may seem contradictory, but it actually follows the core logic of dollar hegemony for over a century: securing global dominance by anchoring the dollar to key resources, using market-driven mechanisms to achieve “soft colonization.” From the gold-backed dollar to the petrodollar, and now the crypto-dollar, the U.S. has continuously evolved its financial instruments while maintaining one constant — making the world voluntarily dependent on the dollar rather than being forced into submission.

After World War II, nations worldwide were desperate to rebuild their economies. The United States, sitting on an enormous gold reserve, seized this moment. At the 1944 Bretton Woods Conference, a single agreement firmly tied the dollar to gold: $35 per ounce. This made the dollar the most trusted reserve and settlement currency for many countries.

At its peak, the U.S. held 75% of the world’s gold reserves, cementing its financial supremacy. However, as global trade expanded, an increasing number of dollars were needed, forcing the U.S. to pump more dollars into circulation while failing to back them with sufficient gold reserves. By 1971, over $500 billion was circulating worldwide, but U.S. gold reserves had dwindled to just 8,000 tons, making full gold redemption impossible. Under immense pressure, President Richard Nixon unpegged the dollar from gold, effectively dismantling the Bretton Woods system.

This event epitomized the famous Triffin Dilemma: the inherent conflict between a currency serving both as a domestic unit of account and a global reserve currency. To supply enough liquidity for international trade, the U.S. had to issue more dollars than its gold reserves could support, ultimately eroding trust in the system. Though the gold-backed dollar era ended, the credibility established during this period laid the foundation for future U.S. financial dominance.

After severing ties with gold, the U.S. urgently needed a new anchor for the dollar — oil became the solution. In 1974, the U.S. and Saudi Arabia forged a pivotal deal: global oil trade would be priced and settled in dollars, while oil-rich nations would reinvest their dollar revenues into U.S. Treasury bonds and financial markets. This created a powerful “Oil → Dollar → U.S. Debt” loop, which remains intact to this day.

As of 2023, over 80% of global oil trade is still priced in dollars, injecting billions into the U.S. financial system daily. By anchoring the dollar to oil instead of gold, the U.S. no longer needed physical reserves to maintain its currency’s supremacy — oil, the lifeblood of industry, became the new backing.

However, this financial dominance also birthed a weaponized dollar: any nation cut off from dollar clearing or removed from the SWIFT system faced economic devastation.

• In 2000, Iraq attempted to price its oil in euros, only to face a U.S.-led invasion shortly after.
• In 2022, amid the Ukraine crisis, major Russian banks were expelled from SWIFT, crippling their international trade.

While geopolitics played a role in these conflicts, the dominance of the petrodollar ensured that challenging U.S. financial supremacy carried severe consequences. Thus, the dollar became a “soft weapon” — an economic instrument more powerful than any military intervention.

Imagine a chaotic digital exchange, where token prices fluctuate wildly. Yet, amidst the volatility, one constant remains: stablecoins pegged to the U.S. dollar (USDT, USDC).

Across the entire blockchain ecosystem, these digital “greenbacks” account for 90% of trading pairs. Some experts even predict that by 2025, USDT’s daily settlement volume could reach $53 billion, surpassing VISA’s $42 billion. In other words, the dollar is not just the world’s dominant physical currency — it is now colonizing the virtual economy through stablecoins.

Astonishingly, the Trump administration appears to be deliberately advancing this shift. By blocking a government-issued CBDC while allowing private stablecoins to flourish, Trump achieves two goals:

1. Avoiding political backlash by framing the move as “decentralization” and “technological neutrality.”
2. Strengthening global dollar dominance under the guise of financial innovation.

By allowing the free market to drive digital dollar adoption, the U.S. ensures that global users voluntarily integrate into a dollar-centric crypto economy.

Ironically, U.S.-sanctioned entities are among those benefiting from this shift. For example, some Russian businesses have used USDT to bypass sanctions, conducting cross-border payments via blockchain rather than traditional banking channels. While SWIFT restrictions can sever financial ties, stablecoin transactions remain unhindered, allowing crypto-dollar hegemony to expand unchecked.

Imagine logging into a decentralized finance (DeFi) platform to stake your assets for yield. Most protocols prioritize USDC and USDT — just as travelers prefer carrying physical U.S. dollars when abroad. Once you opt for stablecoins, you are effectively locked into the dollar ecosystem: for lending, payments, and wealth management, dollar-backed stablecoins become the most convenient and widely accepted medium of exchange.

Even more significantly, on-chain dollar transactions operate independently of traditional monetary policy. While the Federal Reserve may raise interest rates, liquidity on the blockchain remains fluid and moves freely, immune to direct intervention. This self-reinforcing network effect makes the dollar a default standard in the crypto world — and crucially, the U.S. doesn’t need to negotiate with foreign governments. Private companies like Circle (issuer of USDC) simply deploy smart contracts across blockchain networks, making the dollar the “default language” of decentralized finance.

Academics have dubbed this phenomenon “protocol imperialism” — the idea that once the world becomes accustomed to using dollar-backed stablecoins for collateral, payments, and settlements, decentralized blockchain networks unwittingly become instruments for expanding U.S. financial influence.

Paradoxically, stablecoins appear to bypass one of America’s most powerful financial weapons — the SWIFT system. Historically, the U.S. has used SWIFT access as leverage to enforce compliance, freezing the global transaction channels of sanctioned nations. However, with stablecoins, cross-border transactions can be settled directly via blockchain, circumventing SWIFT altogether.

By 2024, it is projected that 67% of cross-border on-chain payments will use dollar-backed stablecoins, eroding U.S. control over global financial flows.

But the story isn’t that simple. No matter how “decentralized” stablecoins appear, they are still pegged to U.S. dollar's credibility. If the Federal Reserve adjusts interest rates, the cost of capital worldwide will still follow suit. More importantly, stablecoin issuers remain subject to U.S. regulatory oversight.

Take the 2023 case of Tether (USDT) — the company froze $870 million linked to North Korea at the request of U.S. authorities. This action exposed a critical truth: blockchain freedom does not override America’s control over the “dollar trust system.” Whenever necessary, stablecoins can be weaponized just as effectively as traditional financial sanctions.

Another notable feature of crypto-dollar hegemony is the strategic use of offshore entities. Many stablecoin issuers, such as Tether (USDT), are registered in offshore jurisdictions.

For the U.S., this serves two key purposes:

1. Enjoying the global expansion benefits of dollarized stablecoins.
2. Creating a legal firewall — in the event of compliance failures or financial crises, the U.S. government can disown responsibility, claiming that mismanagement falls on private issuers, not state authorities.

At the same time, many individuals and businesses unable to access dollars legally turn to stablecoins for cross-border payments and financing. However, this alternative comes at a steep price: stablecoin users often pay borrowing rates between 4% and 11%, significantly higher than the 1.5% interest on a U.S. bank term deposit.

Put simply, this functions as an invisible “toll tax” on those forced to take the “side door” into the dollar system. For the U.S., this arrangement is highly advantageous:

• Dollar penetration into global trade and investment continues unchallenged.
• When issues arise, the blame falls on private institutions rather than the U.S. government.

This “two-birds-one-stone” strategy ensures that stablecoins expand dollar dominance while shielding the U.S. from accountability.

To secure a foothold in the blockchain economy, nations must issue their own sovereign stablecoins.

• Singapore’s XSGD and Indonesia’s IDRT have already lowered cross-border transaction costs.
• China’s digital yuan (e-CNY), via mBridge, is facilitating direct oil payments with Middle Eastern countries, reducing reliance on the dollar.

The key to success is ensuring reserve transparency and strict regulatory oversight — otherwise, capital flight and liquidity crises could undermine trust. Only when sovereign stablecoins achieve widespread adoption in cross-border trade, retail payments, and DeFi protocols can they effectively challenge dollar-denominated settlements.

Fighting dollar hegemony on-chain requires collective effort. Regional currency alliances are critical to dismantling the entrenched dominance of stablecoins.

• Southeast Asia is working on interlinked payment systems, enabling direct settlements in local stablecoins instead of relying on the dollar.
• Latin America is experimenting with “digital currency corridors”, facilitating billions in cross-border transactions.

By creating alternative networks, local or regional currencies can become the default for trade and investment. However, for these efforts to be sustainable, countries must:

• Standardize technical infrastructure.
• Establish clear regulatory frameworks.
• Defend against “reverse infiltration” from dollar-backed stablecoins.

As the petrodollar faces growing challenges, the global financial system is searching for new reserve anchors.

• Gold accumulation is at record highs, as countries diversify away from dollar reserves.
• Some experts propose a future reserve system backed by high-tech resources, such as semiconductors and rare earth metals.

Yet, challenging dollar supremacy is not just about alternative reserves — it requires a complete restructuring of global financial infrastructure. Without:

• Trusted international settlement networks
• Unified regulatory mechanisms
• Widespread alternatives to dollar-denominated pricing

…the dollar’s dominance will persist. If the U.S. anticipates a shift, it may preemptively introduce “Tech Dollars” — leveraging AI, big data, and smart contracts to fortify the dollar’s grip on payments and settlements.

From Fort Knox gold to Persian Gulf oil and now blockchain smart contracts, the U.S. consistently secures control over critical resources, using a market-driven approach to globalize the dollar.

• The gold-backed dollar relied on precious metal scarcity.
• The petrodollar leveraged the industrial era’s lifeblood.
• The crypto-dollar is now embedding itself into blockchain infrastructure, treating the digital economy as its next stronghold.

Some may ask:”If crypto is decentralized, why is the dollar still in control?”

The answer lies in network effects and trust — the dollar remains the default unit of account both on-chain and off-chain. By offering unparalleled liquidity and convenience, the U.S. does not need to force global adoption — it simply ensures that the world chooses the dollar voluntarily.

For other nations, this presents both a crisis and an opportunity.

• Sovereign stablecoins.
• Regional digital alliances.
• Firewalls against technological and institutional dollar influence.
• New anchor assets for reserve systems.

…these could increase monetary sovereignty and reduce exposure to dollar hegemony.

After all, “market-driven” does not mean “fair.” The key question remains: Who controls the critical resources? Who writes the rules of the game?

In this silent currency war, those who wish to avoid being caught in the web must first master the rules of the game.

As Indonesia’s central bank governor aptly put it: “The battle for monetary sovereignty has shifted from gold to code — whoever controls on-chain liquidity will dictate the future global financial order.”

Airdrop Reference is an innovative blockchain education and promotion platform aimed at spreading basic blockchain knowledge and helping ordinary users understand and participate in the development of blockchain technology. The mission of this project is to lower the entry barriers to blockchain, promote high-quality blockchain projects, and allow more people to enjoy the benefits of the Web3.0 era.

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