Financial sanctions imposed on Russia threaten to gradually dilute the dominance of the U.S. dollar and could result in a more fragmented international monetary system, Gita Gopinath, IMF's First Deputy Managing Director, told The Financial Times in an interview.
Russia has been hit with a plethora of sanctions from the United States and its allies for its so-called “special military operation” launched in Ukraine on February 24.
"The dollar would remain the major global currency even in that landscape but fragmentation at a smaller level is certainly quite possible," Ms. Gopinath told the newspaper, adding that some countries are already renegotiating the currency in which they get paid for trade.
She said that the war will also spur the adoption of digital finance, from cryptocurrencies to stablecoins and central bank digital currencies.
Ms. Gopinath told The Financial Times that the greater use of other currencies in global trade would lead to further diversification of the reserve assets held by national central banks.
Reuters notes that she had earlier said the sanctions against Russia do not foreshadow the demise of the dollar as the reserve currency and that the war in Ukraine will slow global economic growth but will not cause a global recession.
