President Trump’s playbook for protecting the US dollar’s global power

The US dollar’s grip on global finance is under attack, and Trump is making sure it stays in control. China, Hong Kong, Thailand, the UAE, and Saudi Arabia have been quietly building a cross-border central bank digital currency (CBDC) called mBridge, designed to let them trade without needing US dollars or SWIFT.

The Bank for International Settlements (BIS) initially backed the project, but just before the US election, the BIS suddenly pulled out. Officials claimed it had reached a “minimal viable product” stage, but according to a report from the Financial Times, Washington forced them to back off.

More specifically, last autumn, just before the US election, the BIS unexpectedly pulled out of mBridge, in effect ceding control to China and the rest. BIS claimed this was just because it had reached “minimal viable product” stage. But few believe this. “The Americans demanded [the BIS] stop because it’s a threat,” one participant tells me, explaining that Washington worried that “it might be used to evade [dollar] sanctions”.

The decision came right before Trump returned to power, and his administration is cracking down on anything that threatens the dollar’s dominance.

Trump moves to block dollar alternatives

Trump has said via many Truth Social posts that any country trying to weaken the dollar will face consequences. He posted a warning that: “The idea that the BRICS countries are trying to move away from the dollar, while we stand by and watch, is OVER. We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US dollar. If not, they will face 100 per cent tariffs and should expect to say goodbye to selling into the wonderful US economy.”

While trade policy has been getting most of the attention, financial warfare is unfolding in the background. The US dollar underpins America’s global power, and Trump isn’t letting that slip.

On paper, the dollar still dominates. The IMF reports that 58% of central bank reserves are held in dollars. That’s lower than two decades ago, but the change has mostly been toward smaller currencies, not major rivals like the euro or yuan. The SWIFT network shows that 49.1% of global transactions last year were in dollars—a 12-year high.

Central banks are hoarding gold at record levels, according to the World Gold Council, signaling that some are hedging against the dollar. At the same time, China is expanding its alternative payment system, CIPS (Cross-Border Interbank Payment System), which has 160 member banks and saw an 80% increase in transactions since 2022. Meanwhile, US financial sanctions have pushed countries to look for alternative trading channels, leading to increased interest in CBDCs.

This is eminently sensible. But Trump seems minded to use sticks. Last month he issued an executive order banning any central bank digital currency usage in America, since they “threaten the stability of the financial system, individual privacy, and the sovereignty of the United States”.

Trump also endorsed Bitcoin, despite its reputation as a hedge against the dollar, and most importantly, he threw his support behind dollar-backed stablecoins, calling for their global expansion.

Some questioned why Trump would support stablecoins, given that the European Central Bank (ECB) has openly opposed them. Stablecoins, unlike CBDCs, expand the use of the dollar, not replace it. The idea is simple: if offshore stablecoins can be used everywhere, then more transactions will be tied to the US dollar—even outside the US banking system.

Howard Lutnick, Trump’s pick for commerce secretary, has deep ties to the Tether stablecoin, which has the highest market cap among stablecoins. During his Senate hearing, Senator Elizabeth Warren said the Tether connection is a conflict of interest, but Howard got confirmed anyway.

The stablecoin market is worth about $220 billion at press time, which is only a fraction of the $6 trillion in US capital markets.

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