The dollar’s slow erosion has been visible for years. Barry Eichengreen, Berkeley’s historian-economist of international currencies, now sees the conditions for an inflection point falling into place. The infrastructure beneath the currency is where the next contest will be decided.
For seven centuries, a single gold coin held the medieval world’s commerce together. The Byzantine solidus, struck under Constantine in the early fourth century and held to the same weight and purity through dynasties, plagues, and the rise and fall of trading partners, became the currency that merchants in Cordoba and Damascus and the southern coast of India accepted on sight. It was the dollar of its day. Then, slowly, it wasn’t.
Barry Eichengreen has spent four decades studying that pattern. He is the George C. Pardee and Helen N. Pardee Chair and Distinguished Professor of Economics and Political Science at the University of California, Berkeley, a research associate at the National Bureau of Economic Research, and a research fellow at the Centre for Economic Policy Research. He is also the rare economist who arrives at the question of money with two graduate degrees from Yale, one in economics and one in history. The combination is not biographical color. It is the source of the argument.
For most of his career, Eichengreen has been writing the historical companion to whatever crisis the international monetary system happened to be passing through. Golden Fetters, Globalizing Capital, Exorbitant Privilege, Hall of Mirrors, and In Defense of Public Debt between them have shaped how a generation of policymakers and academics think about gold, capital flows, currency hegemony, financial crises, and the role of sovereign borrowing in statecraft.
His new book, Money Beyond Borders: Global Currencies from Croesus to Crypto, published by Princeton University Press in March, is the synthesis. Twenty-five hundred years of international currencies, from Lydian electrum coinage of the seventh century BCE through Florentine florins and Spanish silver to the British pound, the U.S. dollar, and the digital currencies now arriving on private blockchains. The argument is direct. The same forces that lift a currency to global dominance eventually set the stage for its erosion. The dollar is not exempt. Eichengreen places it on the downside of the cycle.
For the institutions that clear and settle the world’s cross-border transactions, the question is operational.
I asked him to start where the book starts, with Byzantium. The analogy is the place Eichengreen returns to most often because it makes visible the institutions on which monetary dominance actually rests.
“It’s a Byzantine story,” he says. “Seriously, the stability of the Byzantine solidus rested on multiple foundations: the fiscal probity of Byzantine officials, who ran balanced budgets; rule of law, courts with autonomy that administered laws fairly; Byzantium’s location astride the Bosporus Strait at the entrance to the Black Sea, which allowed the empire to control trade in all directions; and a growing financial system, which was revitalized by the provision of stable money.”
The parallel, in his telling, is uncomfortably close.
“For more than 75 years,” he says, “the dollar’s dominance has been supported by these same factors: America’s commercial prowess, deep financial markets, ability to protect ocean shipping lanes, rule of law, and fiscal probity.”
The qualifier comes immediately. “Now, however, investors have begun to worry about the unsustainable trajectory of U.S. public debt and what this implies for interest rates and inflation. They worry about the stability of the financial system.” He pauses. “Can you say ‘private credit?’”
The aside is characteristic. Private credit, the rapidly growing market in nonbank lending that has expanded into the spaces banks have stepped back from, sits largely outside the perimeter of bank-style supervision. Eichengreen has been writing about that perimeter since Hall of Mirrors. Investors, he adds, “worry about the autonomy of the courts and the Fed.”
Each of those concerns is manageable in isolation. What changes the calculus is when they appear together in the field of vision of a foreign reserve manager deciding where to hold the next billion dollars.
When I asked where the dollar sits on that trajectory today, his answer was characteristically unhurried. Currency change, in his account, is rarely an event. It is a slope.
“The global role of the dollar has been eroding only very slowly,” he says. He cites two indicators. “The share of the dollar in global central banks’ foreign exchange reserves has been falling gradually, on average by half a percentage point a year. The share of U.S. Treasury securities held abroad has been falling since 2015, again by a fraction of a percentage point a year.”
Neither figure registers as news on the day it prints. Across a decade, they describe the rest of the world quietly stepping back from the dollar’s gravity well. The reserve number has fallen from roughly 72% at the start of the century to just under 58% today.
The historical pattern, however, is that gradual decline tends to end abruptly. Eichengreen reaches for an image he uses often.
“An iceberg can melt very gradually,” he says, “until, suddenly, a large sheet of ice calves off.”
Then, the line that warrants attention. “I’m more worried than ever that we’re approaching this inflection point.”
Worried is not a word Eichengreen uses casually. The conditions that produce calving, on his reading, are increasingly in place. He does not predict the trigger. The triggers, in monetary history, are usually obvious only afterward.
Pressed on what would replace the dollar if the calving came, Eichengreen does not soften the point he has been making for years. The euro and the renminbi are the two currencies large enough to carry meaningful global reserve weight, and each is held back by something specific.
“The euro is held back by a lack of market liquidity,” he says, “government bond markets siloed into national segments, and a European Central Bank that remains curiously reluctant to provide euro currency swap lines, euro credits, to foreign central banks.”
That last point matters more than it sounds. The Federal Reserve operates dollar swap lines as a matter of standing policy, providing dollar liquidity to designated foreign central banks in periods of stress. The ECB has not built out a comparable facility in euros. Foreign central banks notice. So do foreign banks managing euro liquidity in a crisis.
“The renminbi,” he continues, “is held back by China’s controls on capital inflows and outflows and an absence of political checks and balances. In particular, no independence for its central bank, the PBOC.”
The point is not ideological. It is about the conditions under which foreign holders are willing to put serious money into a currency they cannot freely move and that is managed by an institution whose mandate is set elsewhere.
In the meantime, a different competition is unfolding. “The U.S. is actively pursuing the issuance of private-label stablecoins,” Eichengreen says, “while both Europe and China are exploring the combination of tokenized commercial bank deposits and central bank digital currencies, which similarly would circulate on private blockchains, opening up a new set of digital payment rails.”
The technologies are converging. The institutional designs are not.
“Time will tell who wins the race,” he says. Then, the kind of aside that survives the reader’s first cup of coffee: “I have a suspicion that the U.S. is betting on the wrong horse.”
When the conversation turns to digital money governance, that suspicion sits inside a longer argument about the line between public and private money, which Eichengreen treats as the central organizing question of monetary history.
“Throughout history,” he says, “2,500 years of history, as I recount in my book, we’ve always had a combination of private and public monies. The line always has been and remains hard to draw.”
He works through the American case. “Today in the U.S. we have private money in the form of commercial bank deposits, and public money in the form of claims on the Fed. But that private money is insured, in part, through the operation of a public agency, the FDIC. And commercial banks can convert their private money into public money at the discount window of the Fed.”
The line is intricate and porous. It is also cyclical. The Free Banking Era from 1837 to 1862 ran on private bank notes that traded at varying discounts to par. The National Banking Acts of the Civil War period reasserted public primacy. The Federal Reserve Act of 1913 added a public lender of last resort. Deposit insurance, in 1933, made the public underwriting explicit. Each generation has redrawn the line in response to the failures of the prior arrangement.
“There are cycles,” Eichengreen says, “more private money in the U.S. after 1836, less private money after 1862. But abstracting from those cycles, I see the arrow of history as pointing toward the public provision of the public good of stable money.”
By that reading, the current American policy turn toward broad authorization of private stablecoins runs against the arrow he describes. The historical record on private monies that promised one-for-one convertibility and failed to deliver under stress is, in his telling, long and uncomfortable. Whether the current generation of issuers proves the exception is, on his account, the question on which the recent legislation ultimately turns.
I asked him last about the rails. If currency dominance is institutional, it is also infrastructural, and this is the part of the argument that lands closest to the desks of the people now reading.
“My book places much emphasis,” he says, “on this close connection between payments infrastructure and currency dominance.”
The dollar is sustained not only by the depth of U.S. capital markets but by the architecture of cross-border payment. SWIFT, CHIPS, Fedwire, and the network of correspondent banks that ride on them are the practical reasons that dollar invoicing, dollar trade finance, and dollar reserves remain the path of least resistance for institutions that could, in principle, choose otherwise.
That architecture is changing on multiple fronts at once. Eichengreen wants the conversation broader than the one Washington tends to have.
“When looking at the U.S.,” he says, “I would urge observers not to become fixated on stablecoins, which have prominence courtesy of social media and some media-savvy digital entrepreneurs. Other important things are happening in the U.S. payments sphere, from FedNow in the not-too-distant past to tokenized bank deposits in the not-too-distant future.”
FedNow, the Federal Reserve’s instant payments service launched in 2023, has crossed 1,700 participating institutions. Tokenized commercial bank deposits are moving from pilot to production at several major banks.
Across the Atlantic, the next layer is taking form. “In Europe,” Eichengreen says, “keep an eye on the ECB’s wholesale CBDC, which promises to facilitate interbank business.”
In Asia, the alternative rails are already live. “In China, CIPS and mBridge are both up and running. The technological problem has been cracked.” CIPS, authorized by the People’s Bank of China, has been operating since 2015 as the country’s wholesale renminbi clearing system. mBridge, the multi-CBDC platform built across central banks in Asia and the Middle East, reached minimum viable product status in 2024.
For Eichengreen, the part that no engineer can solve is the part that decides the contest. “The question is whether Chinese authorities can create confidence in these systems sufficient to encourage international market participants to shift significant amounts of business in their direction.”
For the institutions that operate at the seam between the dollar system and what is forming around it, that question is the operative one. Counterparty exposure on alternative rails. Liquidity in alternative settlement assets. The cost and compliance implications of routing through systems that are subject to a different sovereign. None of these are theoretical. They are decisions being made now, in the language of risk limits and onboarding policies, by institutions whose customers are increasingly transacting across systems that did not exist a decade ago.
What runs through Eichengreen’s account is a single observation, made in different ways. The dollar’s global role is not a feature of nature. It is the cumulative product of choices, institutional and political, that the United States has made over decades and is now in the process of revisiting. The infrastructure underneath the currency is not a settled stack either. It is being rebuilt in parallel in Frankfurt, in Beijing, and in Washington itself, each built on a different theory of how digital money should work.
The privilege of issuing the world’s reserve currency carries enormous benefits for the country that holds it. It also, Eichengreen has long argued, carries the obligation of constant maintenance. The Byzantine solidus did not fail because someone introduced a better coin. It failed because the institutions behind it slowly stopped holding the line.
The dollar’s competition, when it arrives at scale, will not arrive from outside. It will arrive from inside, and it has been arriving for some time.
About the book
Money Beyond Borders: Global Currencies from Croesus to Crypto by Barry Eichengreen is published by Princeton University Press (March 2026, 344 pages).
