Navigating Global Financial System Fragmentation 2025

FIGURE 4 Share of global exchange reserves, global export invoicing and foreign transaction by currency While the US dollar will likely continue to play a significant role as a reserve and funding currency, it is becoming less dominant as a medium of exchange for financing goods and services trade. Amid a trend towards greater trade regionalization, the renminbi and euro are expected to become more important within Asian and European trade.13 Data from October 2024 shows that the renminbi is the second largest global currency in the trade finance market, with a share of 5.8%, just ahead of the euro but behind the US dollar, which has a share of around 83%.14 Digital currencies, including wholesale central bank digital currencies (CBDCs), could provide alternative cross-border payment rails, creating a more diverse global financial landscape. Moreover, rising debt levels in the United States raise questions about debt sustainability, while growing domestic political polarization could undermine the independence of US institutions. Over time, these developments could reduce confidence in the dollar and lead to a more multipolar currency system. Even as financial integration continued to deepen in the 2000s, challenges to the system began to emerge. A crucial turning point came after the terrorist attacks on 11 September 2001, which shifted some governments’ view of the financial system not just as economic infrastructure, but as a powerful tool of economic statecraft.Economic statecraft broadly refers to the use of economic tools and policies by a state to achieve its foreign-policy and domestic objectives. Such measures can include punitive steps such as sanctions, designed to pressure norms-violating countries and to protect the issuing government’s interests, as well as inducements, such as trade agreements aimed at improving relationships and fostering cooperation.1.3 Use of the financial system for economic statecraftGlobal exchange reserves Share of export invoicing Share of daily foreign transactionsBillions of US dollars % GBP EUR RMB JPY USD0102030405060708090100 0102030405060708090100 58% 20% 6% 2%48%$88 $31 $13$17 $722% 7%4% 4%5% Note: To calculate share of export invoicing, project team used the Bloomberg Intelligence FX Strategy Dashboard and Global SWIFT data as a proxy using inbound and outbound traffic processed via SWIFT. To calculate share of foreign transactions, project team used the turnover of OTC foreign exchange instruments by currency, “net-net” basis, 2022 daily averages in billions of USD. Source: Share of global foreign exchange reserves: IMF’s Currency Composition of Official Foreign Exchange Reserves Q2 2024. Share of export invoicing: Bloomberg Intelligence FX Strategy Dashboard. Share of foreign transactions: BIS Triennial Survey, Data Portal. Oliver Wyman analysis Economic statecraft broadly refers to the use of economic tools and policies by a state to achieve its foreign- policy and domestic objectives. Navigating Global Financial System Fragmentation 12