U.S. counters China's de-dollarization… expands 'dollarization'

Encourage allies to adopt official currency

Argentina, Egypt among candidates

The Donald Trump administration is discussing a plan to induce other countries to adopt 'dollarization' (dollarization) as a major or official currency. It appears to be a strategy to strengthen the dollar's dominance by expanding a 'dollar alliance' in global financial markets to counter China's de-dollarization movement.

On the 2nd (local time), the Financial Times (FT) reported that officials from the U.S. Treasury and key White House agencies met in August with Professor Steve Hanke of Johns Hopkins University to discuss ways other countries could adopt the dollar as their national currency. Professor Hanke is an economist whose specialties include currency boards, dollarization, and hyperinflation. According to the FT, the U.S. government has identified countries at high risk of currency crises — including Argentina, Lebanon, Pakistan, Ghana, Turkey, Egypt, Venezuela, and Zimbabwe — as candidates for dollarization. Ecuador and El Salvador use the dollar as their official currency.

This discussion emerged as the Treasury moved to provide financial support (currency swaps and foreign exchange market intervention) to stabilize the Argentine peso. Dollarization is used as a method to curb inflation and stabilize the economy when a country's own currency can no longer perform its basic functions. This was one of the main pledges Javier Milei, Argentina's president, put forward in the 2023 presidential election.

Another background for promoting dollarization is China's recent efforts to reduce the share of dollar-denominated settlements in trade with emerging markets. Professor Hanke explained, "The U.S. administration's interest in dollarization is in the same context as plans to expand dollar-linked stablecoins."

However, both the U.S. and Argentine governments said, "This is not a matter under active consideration," and expressed a cautious stance.

Reporter Dong-hyun Kim 3code@hankyung.com