Pennings, A.J. (2026, Sep 30) US Privilege or Global Benefit? The Future of the Dollar as the AI4D Financial Infrastructure. apennings.com https://apennings.com/dystopian-economies/us-privilege-or-global-benefit-the-future-of-the-dollar-as-the-ai4d-financial-infrastructure/

Introduction

This post places the “dollar” within a global AI4D infrastructure problem, where the USD (US dollars plus Eurodollars, including Petrodollars) is not simply a mechanism of US power, but a globally distributed financial infrastructure whose liquidity and network effects lower the cost of participating in the world economy.[1]

The international dominance of the US dollar is often described as an expression of American privilege. The United States issues the world’s principal reserve currency, enjoys unusually deep financial markets, and possesses the ability to impose financial sanctions on countries that violate its foreign-policy objectives. All of this is true, but it captures only one side of the dollar’s international role. The other side is that much of the world benefits from the infrastructure that produces this privilege.

To the extent that enough can be produced and distributed around the world, the USD is not simply a currency circulating outside the United States. It functions as a global financial infrastructure. Its extensive use creates liquidity, reduces transaction costs, and provides a common unit of account. It also facilitates foreign-exchange conversion, supports international borrowing and lending, and gives businesses and governments access to a large pool of financial counterparties.

The result is a hard-to-overcome network effect. Because so many participants already use USD, it becomes cheaper and easier for additional participants to do the same. This is one of the major reasons China was able to globalize the international marketing of its extensive manufactures and obtain trade surpluses so thoroughly; it simply accepted USD.

The scale of this network remains substantial. The Bank for International Settlements reported that the dollar was on one side of 89.2 percent of all foreign-exchange transactions in April 2025. The IMF reported that dollars represented 56.77 percent of global official foreign-exchange reserves at the end of 2025, compared with 20.25 percent for the euro and 1.95 percent for the renminbi. These figures do not mean that countries are simply choosing American money over their own currencies. They indicate how deeply the dollar has become embedded in the infrastructure through which currencies, trade, investment, credit, and reserves interact.(BIS, 2025; IMF, 2026)

This distinction matters for global AI for Development (AI4D). AI4D is often framed around access to computing power, broadband, data, skills and digital platforms. UN Trade and Development identifies infrastructure, data and skills as major leverage points for inclusive AI development. At the same time, the International Telecommunication Union (ITU) has emphasized ongoing disparities in connectivity, data center capacity, electricity, and computing resources. In 2026, ITU reported that developing countries other than China contained roughly half of the world’s Internet users but less than 10 percent of global data center capacity.(ITU, 2026; UNCTAD, 2025)

But there is another infrastructure beneath these technologies. That is liquidity.[2] A country can have broadband infrastructure and still struggle to purchase imported servers. It can have talented programmers but lack affordable access to cloud computing. It can develop an AI application but struggle to finance the electricity, telecommunications equipment, data centers and semiconductor imports required to operate it at scale. AI4D therefore depends not only on digital infrastructure but also on the financial infrastructure that lets countries, firms, and individuals acquire, finance, and exchange the resources needed to build digital capacity.

The USD system helps perform this function because liquidity and network effects reduce the friction of international exchange. A company in one country can invoice a customer in dollars, borrow through a dollar-linked financial institution, purchase equipment from another country, hedge its currency exposure, and ultimately settle payments through a financial network in which the dollar is already widely recognized. The same network can connect investors, suppliers, banks, cloud providers, technology companies, and governments across national boundaries.

This is why the USD’s international role can be understood as a globally distributed economic benefit produced by an American monetary privilege.

The privilege belongs primarily to the United States. The United States benefits from the ability to issue the dominant international currency, maintain exceptionally deep Treasury markets, attract global demand for dollar assets, and exercise considerable influence over the institutions and rules surrounding dollar finance. Although, it does place responsibility on US policy for generating enough liquidity (USD) for global trade. The primary vehicle has been trade deficits with US dollars leaving American shores for imported foreign goods.

But the economic benefits of the USD network are distributed far beyond the United States. Foreign firms obtain access to dollar liquidity. Foreign governments hold dollar reserves. International banks provide USD credit in exchange for good collateral (Usually US Treasury bonds for Eurodollars). Exporters invoice in dollars. Importers use dollars to purchase commodities and manufactured goods. Investors use dollar markets to move capital across borders.

The relationship is therefore more complicated than a simple center-periphery model in which the United States imposes the dollar upon everyone else. The system contains an important element of voluntary dependence because the network itself creates economic value. A country can desire greater monetary sovereignty while simultaneously having strong incentives to retain access to dollar markets. Moving away from the dollar is not simply a matter of replacing one currency symbol with another (although this is a problem I have explored in my work on networked spreadsheet logic. It means reconstructing payment networks, liquidity pools, foreign-exchange markets, reserve assets, trade-invoicing practices, credit relationships and financial institutions that currently operate at enormous scale around the dollar.

This helps explain the persistent attraction of monetary diversification, as shown by previous discussions at the BRICS meetings. Countries can develop alternative payment systems, bilateral currency arrangements, central-bank digital currencies, or regional financial institutions while continuing to use dollars where liquidity and transaction costs make them economically advantageous.

Diversification and dollar dependence are therefore not necessarily contradictory. They can coexist. The paradox appears when geopolitical relationships deteriorate. The same network effects that make the dollar useful also make the surrounding infrastructure capable of exclusion, and that can significantly impact the excluded country. Just as Russia was accused of using its cheap energy as a political weapon, the West can abuse its USD centrality.[3]

The United States does not have to control every international transaction directly. It can influence access through the institutions and financial chokepoints connected to the dollar system. OFAC, for example, can prohibit or restrict US financial institutions from maintaining correspondent or payable-through accounts for designated foreign financial institutions. Under the Russia-related CAPTA regime, US financial institutions can be prohibited from processing transactions involving designated foreign financial institutions, subject to applicable exemptions and licenses. These restrictions can make participation in the broader financial system considerably more difficult even when the underlying transaction is not simply a dollar payment. (US Department of the Treasury, 2026)

Russia provides a particularly clear illustration of this paradox. The country has pursued alternatives to Western financial infrastructure, including greater use of the ruble, renminbi, and domestic payment systems. Yet the existence of alternatives does not automatically reproduce the liquidity, depth and network effects of the USD-centered system. The economic significance of sanctions therefore derives partly from the same network characteristics that make the dollar useful in ordinary circumstances.

This produces a distinctive form of geopolitical power. The United States receives the privilege, while much of the world receives the benefit, but the privilege gives the United States the capacity to condition access to the benefit.

For AI4D, this creates an important question. If access to AI increasingly depends on access to compute, energy, data centers, cloud platforms, semiconductors, and telecommunications, and if those systems require international finance, then financial connectivity becomes part of technological connectivity. The digital divide and the financial divide begin to overlap.

This matters most for countries at the lower end of the AI infrastructure hierarchy. Wealthier economies can finance data centers, purchase advanced hardware, attract foreign investment and participate directly in international capital markets. Many lower-income countries instead face higher financing costs, weaker currencies, limited electricity infrastructure, inadequate broadband, and restricted access to compute. ITU’s observation that 2.2 billion people remain offline and that unreliable electricity remains a major barrier to digital development demonstrates that AI4D cannot be reduced to the availability of AI software alone. (ITU, 2026)

Dollar liquidity can consequently function as an indirect form of development infrastructure. It can help countries finance imports, support trade, stabilize payments and connect local businesses to international markets. But it does not eliminate the underlying inequalities in AI infrastructure. Financial liquidity can help a country purchase computing capacity; it cannot, by itself, create electricity grids, fiber networks, data centers, semiconductor industries, technical skills, or institutional capacity.

This distinction suggests a useful way to think about AI4D. Development requires both computational capacity and the financial capacity to mobilize it. The emerging stablecoin economy could make this relationship even more important.

Dollar-linked stablecoins can potentially extend dollar-denominated liquidity through mobile wallets and digital platforms without requiring every user to participate directly in the traditional correspondent-banking system. In countries where access to conventional dollar accounts is expensive or limited, stablecoins could lower the transaction costs of remittances, e-commerce, and cross-border payments. In an AI4D context, they could become another layer connecting people and firms to the financial resources needed to participate in digital markets.

But stablecoins also reproduce the central paradox of the dollar system. They may distribute access to dollar liquidity more widely while simultaneously extending the reach of US-centered financial regulation. A digital wallet can make the dollar more accessible to a small business in a developing economy, but the infrastructure supporting that wallet can also incorporate identity requirements, compliance systems, transaction monitoring, and sanctions controls. Greater financial inclusion and greater regulatory reach can therefore occur simultaneously.

The larger AI4D issue is not whether countries should simply accept or reject the dollar. It is whether global development can transform existing financial network effects into broader technological capacity.

The USD infrastructure already provides much of the world with something economically valuable. It provides a highly liquid international medium for exchange, settlement, investment, and credit. AI4D can build upon that infrastructure, but it must connect financial liquidity to the physical and computational infrastructure of development. Broadband, cloud computing, electricity, data centers, mobile networks, digital platforms, local data, programming skills and organizational capacity all have to be financed and coordinated.

Seen this way, the dollar is neither merely an instrument of American domination nor simply a neutral global utility. It is a mutually beneficial but politically asymmetric infrastructure. Its network effects generate substantial benefits for participants worldwide, while its institutional structure gives the United States unusual capacity to restrict participation when geopolitical relationships break down. That is the central paradox of the dollar in the age of AI4D. The same network that lowers the cost of global economic participation can also raise the cost of exclusion.

The challenge for AI4D is therefore to expand technological agency without unnecessarily destroying the network benefits that already support global economic exchange. Developing countries need greater capacity to build, adapt, govern and capture value from AI, but they also need access to the liquidity, markets and infrastructure that make such capacity economically viable. The objective is not necessarily to replace every existing network. It is to make participation in global networks less fragile, more inclusive, and better able to support locally controlled development.

The future of AI4D may therefore depend on the interaction of two infrastructures usually analyzed separately. One is the computational infrastructure that makes AI possible, and the other is the financial infrastructure that enables investment and exchange. The dollar sits at their intersection.

References

Bank for International Settlements. (2025). OTC foreign exchange turnover in April 2025. [BIS report]()
International Monetary Fund. (2026, March 27). Currency Composition of Official Foreign Exchange Reserves (COFER): Fourth quarter of 2025. [IMF Data Brief](https://data.imf.org/en/news/imf%20data%20brief%20march%2027?utm_source=chatgpt.com)

International Telecommunication Union. (2026, July 10). AI for Good 2026: My Key Takeaways. [ITU report](https://www.itu.int/hub/2026/07/ai-for-good-global-2026-my-key-takeaways/?utm_source=chatgpt.com)
UN Trade and Development. (2025). Technology and Innovation Report 2025: Inclusive Artificial Intelligence for Development. [UNCTAD report]
U.S. Department of the Treasury, Office of Foreign Assets Control. (2026, June 11). Frequently asked questions: Russian Harmful Foreign Activities Sanctions. [OFAC guidance]()

Notes

[1] While I sometimes use dollar and USD interchangeably, I prefer to make the USD inclusive of US dollars produced domestically within the US through legislative decree, US bank lending, and Federal Reserve printing (real physical printing). Federal Reserve purchases of private sector bonds through repos or QE improve the ability of the private banking sector to lend US dollars. USD also includes Eurodollar lending, a major source of US dollars since the 1950s, although accelerated through “petrodollars – USD purchased hydrocarbon products, since the 1970s.
[2] In the context of international development, liquidity refers to the immediate availability of cash, foreign exchange reserves, or short-term financing that developing nations can access to meet their urgent, short-term external financial obligations. A sudden drop in global liquidity or domestic reserves can derail decades of poverty-reduction efforts.
[3] The factual anchors above are supported by the BIS’s 2025 FX survey, which puts the dollar on one side of 89.2% of global FX trades, and the IMF’s Q4 2025 COFER data showing a 56.77% dollar share of official reserves. (Bank for International Settlements) See “OTC foreign exchange turnover in April 2025”
[4] https://unctad.org/meeting/launch-technology-and-innovation-report-2025?utm_source=chatgpt.com “Launch of the Technology and Innovation Report 2025 | UN Trade and Development (UNCTAD)” [1] UNCTAD identifies infrastructure, data and skills as central to inclusive AI development, while ITU’s 2026 assessment highlights the severe geographic concentration of data centers and continuing connectivity and electricity constraints. (UNCTAD) The sanctions discussion is grounded in current OFAC rules concerning correspondent and payable-through accounts.(OFAC)
[5] The sanctions discussion is grounded in current OFAC rules concerning correspondent and payable-through accounts.(OFAC)
[6] “Frequently Asked Questions – Recently Updated | Office of Foreign Assets Control”

AI Prompt(s) Explore my notes and take the argument for a blog post stronger that the USD (US dollar + Eurodollar) is an exorbitant benefit for the world’s countries. This is primarily because of the increased liquidity and lower transaction costs, with the exception of the poorest countries that suffer from the perception of high risk (tier 4 and 5). But the countries that benefit do run the risk of going against the US, which has enough ability to exclude them from this exorbitant benefit. For example Russia. Elaborate on the USD’s benefits and describe the tools the US and the West has to impose sanctions that restrict their access to the USD infrastructure. Elaborate on whether the introduction of US treasury pegged stablecoins will relieve or exacerbate the benefits and problems associated with USD.
Rewrite with the argument that the United States gets the privilege, but much of the world gets the benefit—and that benefit can be so economically valuable that even countries actively seeking monetary diversification have strong incentives to retain access to the dollar system.
Write a version within the context of global AI4D that emphasizes the dollar’s international dominance understood not only as an American privilege imposed on the rest of the world, but as globally distributed economic benefit produced by liquidity, network effects, and low transaction costs. The paradox is that the United States can use the same infrastructure to restrict access when geopolitical relationships break down.

© ALL RIGHTS RESERVED

Not to be considered financial advice. AI is often used, and results are thoroughly interrogated. Links are used for some citations. Views are my own and do not express the stances of my employers, past or present.

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Anthony J. Pennings, PhD is a Professor at the Department of Technology and Society, State University of New York, Korea and a Research Professor for Stony Brook University. He teaches AI and broadband policy. From 2002-2012 he taught digital economics and information systems management at New York University. He also taught in the Digital Media MBA at St. Edwards University in Austin, Texas, where he lives when not in Korea.

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Tags: AI4D > USD liquidity

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