Will dollar dominance give way to a multipolar system of currencies?

IN THE WAKE of an invasion that drew international condemnation, Russian officials panicked that their dollar-denominated assets within America’s reach were at risk of abrupt confiscation, sending them scrambling for alternatives. The invasion in question did not take place in 2022, or even 2014, but in 1956, when Soviet tanks rolled into Hungary. The event is often regarded as one of the factors that helped kick-start the eurodollar market—a network of dollar-denominated deposits held outside America and usually beyond the direct reach of its banking regulators.The irony is that the desire to keep dollars outside America only reinforced the greenback’s heft. As of September, banks based outside the country reported around $17trn in dollar liabilities, twice as much as the equivalent for all the other currencies in the world combined. Although eurodollar deposits are beyond Uncle Sam’s direct control, America can still block a target’s access to the dollar system by making transacting with them illegal, as its latest measures against Russia have done.