IMF official: Russia sanctions may 'fragment' currency market, dilute dollar's influence

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Russia's invasion may have led to prolonged, heightened inflation and greater adoption of cryptocurrencies among nations.

Gita Gopinath, IMF’s First Deputy Managing Director, told the Financial Times Friday that the sanctions have pushed Russia to seek assistance from other currencies. The increased use of other currencies, such as China’s renminbi, could lead to a more fragmented international monetary system. "The dollar would remain the major global currency even in that landscape, but fragmentation at a smaller level is certainly quite possible," Gopinth said.

Gopinath noted that the dollar’s share of international reserves dropped from 70% to 60% over the past two decades. Russia’s invasion of Ukraine will also push more entities to consider the adoption of digital currencies, further diluting traditional currency value. China had already explored the possibility of adopting digital currency at its central bank.

"All of these will get even greater attention following the recent episodes, which draws us to the question of international regulation," said Gopinath. "There is a gap to be filled there."

 

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