IMF reports rise of non-traditional reserve currencies…Bitcoin?

Riz Pabani
Published in
3 min readApr 6, 2022


On March 24, 2022 — the IMF published a paper, ‘The Stealth Erosion of Dollar Dominance: Active Diversifiers and the Rise of Non-traditional Reserve Currencies”.

The paper looked at the ‘Stealth Erosion’ of USD as a reserve asset and how over the past few decades the dollar is becoming a smaller and smaller part of central bank reserve currency in percentage terms.

The paper explains that central bankers typical tweak reserve currency ratios in response to interest rate or exchange rate fluctuations; and that the changes are typically made into other major currencies (EUR, YEN, CNY).

The dollar initially became the global reserve currency following the Bretten Woods agreement in 1944 where 44 countries agreed to effectively peg their currency to USD. This was primarily because the dollar was underwritten by the FED’s gold reserves — any dollar could be exchanged for an equivalent amount of gold — and it was useful for international trade.

However in the years since the dollar stopped being pegged to gold— see — most countries continued to use dollars as there was no other obvious alternative and because it had established itself as the preferred medium of exchange for international trade.

The IMF, also incorporated at the Bretton Woods conference in 1944, say in the report:

“the shift out of dollars has been in two directions: a quarter into the Chinese renminbi, and three quarters into the currencies of smaller countries that have played a more limited role as reserve currencies”

The paper concludes that:

“if dollar dominance comes to an end (a scenario, not a prediction), then the greenback could be felled not by the dollar’s main rivals but by a broad group of alternative currencies”

Please see the list of Non-traditional Currencies from the report:

Clearly Bitcoin is not technically considered a Non Traditional Currency by Central Banks; it’s not even considered a currency yet…

However there are numerous reasons Bitcoin will gain its ‘official’ status as a currency and even more reasons why central bankers will start considering it as a potential reserve currency:

  1. Bitcoin has all of the properties of sound money (scarcity, acceptability, divisibility, durability, portability and fungibility)
  2. Bitcoin market cap (nearly $1 trillion) is close to the M1 money supply of AUS and CAD (nearly $2 trillion each) — it will be there in a few years
  3. Payment networks and monetary management technologies are being built and innovated by the Crypto / Blockchain industries. Some would say leading the way for central banks to follow
  4. Bitcoin is censorship resistant in that no single entity has the ability to reverse a Bitcoin transaction or block access to the network for a particular wallet
  5. Bitcoin adoption is growing exponentially as more and more countries make it legal tender or consider it viable for retail and international trade

All things must end and as the dollar declines in value through inflation, quantitative easing and excessive borrowing — non traditional currencies will continue to gain a bigger share of central bank balance sheets.

Bitcoin’s characteristics as sound money, its popularity and given it can remain neutral politically mean it has a strong case for becoming an international reserve currency of choice. It doesn’t have many serious competitors at the moment and will be serious contender in the coming decade if its use continues.

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Riz Pabani

I write about mentoring, productivity, finance, crypto, Python and Data Science. Please follow if you like