Trump's Push For Industrialisation Is Accelerating De-dollarisation: Kotak Securities Anindya Banerjee

Chennai: De-dollarisation isn’t just about geopolitics or sanctions—the real story is that the underlying business model of the dollar as a reserve currency is breaking down, said Anindya Banerjee, Head, Commodities and Currencies at Kotak Securities, in a talk with Financial Chronicle. US President Donald Trump’s push for industrialisation is accelerating de-dollarisation. The dollar will be replaced by a multipolar Central Bank Digital Currency (CBDC) backed by gold and other commodities.

Before we get into de-dollarisation, how did the US dollar become dominant in global transactions?

A reserve currency allows a country to print money without triggering inflation or high interest rates. The US dollar gained this status because it became essential for global trade and capital flows. After the Bretton Woods Agreement, the dollar replaced the British pound, although the transition had begun in the 1920s.

The big shift came in 1971, when the US moved away from gold-backed currency to a fiat system. Since the world had never seen a reserve currency not linked to gold, the dollar initially faced pressure. To sustain demand, the US effectively linked the dollar to oil trade. That ensured countries needed dollars to buy energy, and eventually for all commodities and trade. This created a system where the US could print and spend, while the rest of the world financed it by holding dollar assets.

When did countries begin to rethink their dependence on the dollar?

The idea existed earlier, but the turning point was the Global Financial Crisis. That was when the limitations of the system became visible. Consumer debt in the US peaked, and since then growth has relied more on government borrowing. Government debt-to-GDP has nearly doubled over time.

At the same time, global central banks shifted from being net sellers of gold to consistent buyers. Historically, such accumulation signals a change in the monetary order. So 2008 can be seen as the starting point of de-dollarisation.

What is driving the current acceleration in de-dollarisation?

The core issue is the sustainability of the US debt model. The system depends on continuous demand for US debt from the rest of the world. But in the past few years, particularly among BRICS countries, that demand has weakened.

Central banks are now selling dollar assets in the process of intervening in currency markets. If large buyers step away, the ability to sustain low-cost borrowing disappears. That is why the current phase is not just cyclical—it is structural.

How is the US itself contributing to this shift?

Policy actions in the US are reinforcing de-dollarisation. Measures under Donald Trump—such as higher tariffs, tighter immigration norms and a push for domestic manufacturing—indicate a shift away from a model where the US exports demand and imports goods.

If the US starts servicing its own demand, the need for a global reserve currency reduces. This trend has continued across administrations, with trade barriers and protectionist policies remaining in place. Actions of US President Trump to promote industrialisation are aligned with de-dollarisation, regardless of the rhetoric.

What are the implications for the US economy?

The impact is already visible in financial markets. Long-term bond yields are not falling despite rate cuts, because demand for US debt is weakening. Asset classes that benefited from the dollar’s reserve status—such as real estate, equities and bonds—are likely to face pressure.

There could be a broader correction in US asset markets over the next few years as the premium associated with dollar dominance declines. The housing market is already seeing reduced activity, and trade is feeling the impact of shifting global dynamics.

How are countries actually moving away from the dollar?

Central banks are increasing gold reserves, while governments and institutions are acquiring natural resources such as metals, energy and rare earths. In many ways, commodities themselves are becoming a form of currency.

At the same time, trade is shifting from multilateral frameworks to bilateral agreements, often involving local currency settlements. Advances in digital payment systems and the development of CBDCs are enabling this transition by reducing transaction friction.

Can local currency trade fully replace the dollar system?

There are challenges, especially around trade imbalances and convertibility. Without digital infrastructure, such systems would be inefficient. But with CBDCs and interconnected payment systems, these frictions are being reduced. Countries are experimenting with new frameworks, and the transition is gradually taking shape.

Is any single currency likely to replace the dollar?

No single currency—not even China’s yuan—can replace the dollar. The reason is simple: no country today can replicate the US model of running an “unlimited credit card,” where it prints money, consumes and allows others to finance it.

Instead, the world is moving towards a multipolar system. This could involve a basket of currencies, supported by CBDCs and anchored by gold and other commodities.

What role will gold play in this transition?

Gold is central to the shift. Over the past few years, its value has risen as part of a broader monetary reset. The value embedded in reserve currencies is gradually being transferred to gold and, to some extent, silver.

In the transition phase, gold prices are likely to rise further. Once a new system emerges—possibly with currencies pegged to gold or commodities—prices may stabilise within a band, similar to the pre-1971 period.

Will the dollar lose its relevance completely?

De-dollarisation is not about eliminating the dollar. It is about reducing its dominance. The dollar will remain an important currency in the global system, but it will no longer have monopoly power.

What is emerging instead is a multipolar world order, where multiple currencies and assets coexist. As countries adjust their reserves, trade systems and financial infrastructure, the global monetary system is undergoing a fundamental transformation—one that signals the end of a unipolar currency regime.