Opinion | Why the global financial landscape is undergoing a seismic shift
- Regulators are struggling to keep up with fintech’s rapid growth and the impact of big data, even as intense geopolitical rivalries mean accidents could easily escalate into crises
August 15 this year marks the 50th anniversary of US President Richard Nixon delinking the US dollar from gold. Instead of a crisis, the ensuing half-century marked the pre-eminence of the US financial system.
In 2017, then US Treasury secretary Steven Mnuchin commissioned four major studies on the US financial system that reviewed its efficiency, resilience, innovation and regulation. These surveys highlighted US dominance in all four areas of banking, capital markets, asset management and financial technology.
The reports proclaimed the US banking system “the strongest in the world”. Its capital markets were deemed “the largest, deepest, and most vibrant in the world”. According to the reports, “nine of the top 10 largest global asset managers are headquartered in country” and, in fintech, “US firms accounted for nearly half of the $117 billion in cumulative global investments from 2010 to 2017”.
Underpinning the US financial system’s success is the US dollar’s dominant currency pricing role. The dollar accounted for 88 per cent in paired foreign exchange currency trading in 2019 and 59 per cent of official foreign exchange holdings in 2020.