The American dollar has been banned in 11 countries and if President Donald Trump follows through with his promise to impose tariffs on these nations, it’s bad news for the United States economy. The consequences of this move include a reduced global demand for the dollar. Its role as the dominant international reserve will also be challenged.
11 Commonwealth of Independent States nations have banned the dollar
It’s the end of the United States dollar in 11 nations under the Commonwealth of Independent States (CIS) and the situation has serious repercussions for the American economy. All commercial transactions in the currency are banned, and not even the banknotes and coins are allowed to be in circulation. This is one of the biggest challenges the dollar has faced in recent history and the Fed is scrambling to protect the economy in the face of this concerning development.
The move affects both local consumers and international operations, but the governments of these nations are adamant about boosting their national currencies by reducing the influence of the US dollar on their economies and promoting national currencies.
The decision is part of a growing global trend known as “de-dollarization.“ The international financial equilibrium is likely to shift in the near future and new alternatives in the currency market will emerge.
There’s another matter affecting American currency at the moment. The US may not have a $100 bill in the future and there’s talk of phasing this denomination out of the currency entirely.
What does the Fed have to say about the banning of the dollar by CIS nations?
There are political and economic reasons behind the banning of the dollar by the 11 nations under the Commonwealth of Independent States. The member countries are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan, and Ukraine, and they’ve followed the United States of Russia’s lead after it imposed sanctions on the US dollar in 2022.
These nations have now increased the use of their own currencies and 85% of transactions are now in local currencies.
The Federal Reserve is closely monitoring the situation and formulating strategies to mitigate the economic damage, however, the American monetary authority hasn’t issued any statement yet.
How will the process of dedollarization be administered?
The dedollarization policy will come into force in stages over several months. The 11 countries under the CIS have legislated that dollar notes or coins may not be used in any private or commercial transaction. This ban aims to ensure the definitive dedollarization of the region.
Each country will set out its own deadlines and procedures for the exchange of dollars. Authorities recommend that people who are still in possession of any US currency exchange it at a bank as soon as possible. In most cases, registration and validation will be insisted on to convert dollars or purchase assets such as gold.
The context of dedollarization among CIS states
Russia chaired the summit of the leaders of the Commonwealth of Independent States in 2024 in Moscow. The most important function of the gathering was to hold a meeting of the Council of Heads of CIS member states. It was attended by the leaders of Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan.
Russian President Vladimir Putin declared that relations with the countries of the Commonwealth of Independent States are one of the priorities under Russia’s foreign policy. According to Putin, the coordination of the actions of the members of the association on international platforms is vital.
Putin also described the main tasks facing the CIS, which include fighting terrorism and organized crime. Trade and economic cooperation issues are also priorities.
“I am pleased to note a marked improvement in the macroeconomic indicators of the CIS member states, as well as the growth of mutual trade and investment exchanges within the Commonwealth. Thus, the aggregate GDP of our countries increased by 4.7 percent in the first half of the year.”
Belarusian President Aleksandr Lukashenko said strengthening ties within the association is necessary to develop and strengthen the potential of the Commonwealth states in various sectors:
“We need a strong union of strong, economically self-sufficient sovereign states. We regularly talk about equal conditions and respect for national interests. Much has already been done, but there is also something to strive for.”
The United States is no doubt reeling from the CIS’s decision and hoping that other nations don’t follow suit. The Federal Reserve will need to take some kind of action to prevent the value of the dollar slipping if that’s possible.