The hegemony of the US dollar is a central feature of the current international monetary system, and the US dollar has long dominated global payments, settlements and reserves. However, with the development of digital currencies, especially fiat digital currencies, the hegemony of the US dollar is facing an unprecedented impact. This study analyzes the formation basis and evolution path of US dollar hegemony from the two dimensions of history and reality, and points out that the three pillars behind it are national credit, the dominant force of the financial system, and the military strength of science and technology. Furthermore, through theoretical and empirical analysis, this study explores the institutional advantages of fiat digital currency in reducing cross-border transaction costs, improving settlement efficiency and security, and its potential weakening effect on the dominance of US dollar settlement. Using the difference-in-difference model and combining data from multiple countries, it is empirically found that the launch and promotion of legal digital currency have significantly reduced the proportion of US dollars in international settlements to a certain extent, especially in developing countries and high-inflation economies. The conclusion shows that fiat digital currency has the potential to reshape the global monetary landscape and promote the diversification of international currencies.
Ran Wei (Tue,) studied this question.