Historically, America has embraced the dollar’s role as more than just a currency. It has served as a standard of value, a reserve asset, and a symbol of stability. However, in recent years, concerns have emerged about a potential technological lag compared to China. A slowdown in development in key economic sectors, coupled with shifting geopolitical dynamics, has fueled these concerns. Donald Trump’s policies have drawn significant criticism both domestically and internationally. Despite these challenges, investors remain optimistic about America’s underlying technological capabilities, as evidenced e.g. by SpaceX’s recent successful IPO.
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The United States has always taken pride in its market economy, characterized by the agility of economic actors. The rapid growth of innovative sectors, fueled by breakthrough technologies, has been a source of admiration—and envy. According to Schumpeter’s theory of “creative destruction,” producers must adopt the best available technology to survive. Consequently, consumers are expected to make purchasing decisions that maximize their utility, guided by the principle of consumer sovereignty, a concept pioneered by British economist William Harold Hutt in 1936. This theory suggests that sustained growth is only possible with the free choice of the best available products.
The Trump administration claims that economic actors around the globe continue to choose the dollar as the preferred currency for transactions. The question remains as to whether the dollar currently represents the “best available technology” and “best consumer choice.” An objective review may be disconcerting.
Rusting infrastructure vs. digital innovation
Much of the financial infrastructure used to process today’s dollar transactions dates back 50 to 100 years and is a relic of the mid-20th century. Although the software has been updated periodically, the core architecture of the dollar ecosystem was established decades ago. For example, CHIPS, the clearing system for large international interbank transfers, launched in 1970. SWIFT, the global messaging network, came online in 1973. The U.S. Automated Clearing House (ACH) has been operating since 1974, still processing settlements with multi-day delays.
South Africa’s interbank transfer system (SAMOS) launched in 1998, followed by Brazil’s (STR) in 2002. India’s SWIFT alternative, SFMS, has been in operation since 2001. Russia has relied on SPFS since 2014. Finally, China’s CIPS was launched in 2015. More recently, retail systems have emerged: India’s UPI (2016), Russia’s SBP (2019), and Brazil’s PIX (2020). Since 2022, the Pan-African Payment and Settlement System (PAPSS) has been operational.
Clearly, electronic payment systems operating outside of U.S. dollars are experiencing rapid growth. These systems operate with greater speed and efficiency than traditional dollar channels because they are more recent and require fewer resources while experiencing fewer technical errors.
Furthermore, approximately one hundred countries are currently developing their own central bank digital currencies (CBDCs). Evidently, the world is on the cusp of significant change, with national currencies poised to play an increasingly important role in the near future. Businesses will naturally select the optimal technology available on the market.
Plugging gaps and the end of “dollar by default”
Until recently, the United States relied on the “dollar by default” phenomenon and did not take steps to address these shortcomings. Not until 2023 did the Federal Reserve launch a new national system, FedNow, for the first time since the 1970s.
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Upon taking office, Trump prioritized developing the dollar-backed stablecoin segment — tokens pegged to U.S. assets, such as Treasury bonds. Although transaction volume involving stablecoins is rising, these cryptocurrencies have notable drawbacks. These include heavy reliance on private issuers, risk of de-pegging, and questions about audit transparency. For reasons that are not yet fully understood, Washington has not yet implemented the initiative to create a central bank digital currency.
As a result, the U.S. strategy for the digitalization of finance seems more like a “patchwork” approach, reacting to emerging challenges without a systemic overhaul.
Consequently, the U.S. strategy for digital finance seems to be a plugging skill gaps approach rather than a comprehensive, long-term plan for systemic change.
The clock is ticking for the dollar
The Trump administration has consistently promoted the restoration of national economic strength and technological leadership. However, this focus has been limited in scope with regard to the financial sector. Consequently, there is growing concern that economic actors worldwide will choose other currencies over the dollar if they prove to be more practical and time-efficient.
At this point, it is less important to determine who is correct—Trump or his opponents. If the U.S. economy continues to prioritize an outdated financial system over adopting new digital solutions, it risks maximizing the potential of existing infrastructure without creating anything new. This could have significant implications for the United States, comparable to the crises of the 1970s.
Nevertheless, the timeframe for this transition is narrowing more quickly than the White House anticipates.
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