"Imagine Bitcoin becoming an official U.S. legal tender or a "Mar-a-Lago Accord" restricting foreign ownership of U.S. Treasuries. That is the level of "catastrophic missteps" required to unseat the U.S. dollar as the world's reserve currency, according to author and journalist Paul Blustein. Blustein has spent years studying the subject, as detailed in his latest book, King Dollar: The Past and Future of the World's Dominant Currency."
"The dollar enjoys two crucial advantages that its rivals lack. First, it operates within an open capital account, meaning capital can move freely across U.S. borders. Second, U.S. financial markets offer unparalleled depth, breadth, and liquidity. "Treasuries are the one asset, by far, that you can liquidate in large amounts and get the cash you need without such a terrible loss," Blustein said."
Only catastrophic policy missteps — for example, adopting Bitcoin as U.S. legal tender or restricting foreign ownership of Treasuries — could realistically unseat the U.S. dollar as the global reserve currency. Predicted threats such as 1970s inflation, Japan's rise, the euro's introduction, the Global Financial Crisis, and China's ascent failed to displace the dollar. Currency dominance is determined by markets rather than governments. The dollar benefits from an open capital account and unmatched depth, breadth, and liquidity in U.S. financial markets. Treasuries offer uniquely large-scale liquidity. The dollar composes roughly 60% of central-bank reserves and dominates trade invoicing and foreign-currency corporate borrowing; replacing it would be extremely costly and slow.
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