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The de-dollarization narrative has become one of the most popular themes in global macro circles over the past few years. But new research from the Federal Reserve Bank of New York suggests the scoreboard might be misleading.
The study found that the decline in the dollar’s share of foreign exchange reserves, which fell from 64% in 2015 to 56% in 2025 according to IMF COFER data, doesn’t reflect a broad-based retreat from the currency. Instead, it’s mostly the result of moves by a small number of large reserve managers.
A few countries doing the heavy lifting
The New York Fed’s researchers identified China, Russia, Mexico, and Morocco as the primary drivers behind the aggregate decline. The bulk of the drop occurred after 2019, with the period from 2019 to 2023 accounting for roughly 2.3 percentage points of the decrease.
The research breaks down reserve shifts into two distinct channels. The first is what the authors call the “active preferences channel,” which captures intentional decisions by central banks to change the currency composition of their reserves. The second is the “reserve change channel,” which reflects mechanical adjustments. When a country’s total reserve pool grows or shrinks, its weight in the global aggregate changes even if it hasn’t touched its currency allocation at all.
Among 62 countries examined from 2019 to 2023, the active preferences channel actually showed a slight positive contribution of 0.3 percentage points toward dollar holdings. In plain terms: when you look at what most central banks were deliberately choosing to do with their reserves, they were marginally increasing their dollar exposure, not decreasing it.
Why the narrative outran the data
Russia’s reserves were frozen after the invasion of Ukraine, creating an obvious incentive for Moscow to diversify away from dollar assets well before sanctions hit. China has its own strategic reasons for reducing dollar dependence. These are enormous reserve holders whose decisions move the needle on aggregate statistics in ways that can obscure what dozens of smaller countries are actually doing.
Earlier studies covering 2015 to 2021 had flagged contributions from China, India, Russia, Turkey, and Switzerland as significant factors in dollar reserve changes. The New York Fed’s latest work refines that picture by separating intentional reallocation from mechanical effects, revealing that the headline numbers tell a more dramatic story than the underlying behavior warrants.
Economist Mohamed El-Erian has emphasized the importance of monitoring these dynamics closely through the end of the year, noting that the characteristics of the decline deserve careful observation rather than sweeping conclusions.
What this means for crypto and alternative reserves
Gold has been a more direct beneficiary of reserve diversification efforts, particularly from China’s central bank, which has been on a sustained buying spree. But even here, the New York Fed’s framework suggests caution: much of what looks like a global trend is really a China story, and extrapolating one country’s strategic choices to the entire central banking community is a recipe for analytical error.
The 56% share is still historically low and worth watching, but the decline is concentrated rather than diffuse. Russia’s options for further diversification are constrained by sanctions. China’s pace of reserve reallocation could slow if US-China relations stabilize. Mexico and Morocco are smaller players whose moves matter for the statistics but don’t signal a fundamental shift in global monetary architecture.
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