Why the Snatching of Maduro Should Make Washington Worry About the Dollar

For nearly eight decades, the U.S. dollar has occupied a place in the global order that no other currency has matched. It is the world’s default unit of account, its preferred medium of exchange, and its ultimate store of value. This dominance has given Washington enormous advantages, from low borrowing costs to unmatched financial leverage. It has also encouraged the belief that the dollar’s supremacy is permanent.

That belief is weakening.

As 2026 begins, the dollar is under sustained pressure after a notably weak 2025. It has opened the year near multi-month lows, weighed down by expectations of further Federal Reserve rate cuts as inflation eases and labor markets cool. These are not merely technical adjustments. They reflect a broader reassessment of the United States as the world’s financial anchor.

That reassessment has been sharpened by events far from Wall Street. The capture of Nicolás Maduro in Caracas and his rapid transfer to New York to face narco-terrorism charges was a stark reminder of how tightly American military reach and financial power are intertwined. Global stock markets trended higher, and Venezuelan bonds rallied on hopes of political change. Oil prices dropped, while gold surged as investors sought safety. The message was clear. American power is effective, but it is also unsettling.

For many countries, especially in the developing world, the lesson was not about Venezuela itself. It was about vulnerability. When military force and financial control move together, the line between law enforcement and coercion can appear thin. The operation reinforced the reality that access to the global financial system ultimately runs through Washington.

This perception has been building for years. The expanding use of sanctions, asset freezes, and financial restrictions has shown how easily dollar-based networks can be turned into instruments of pressure. Entire economies have been cut off from international payments. Central bank reserves have been immobilized. These measures are often justified, but they also remind other governments that reliance on the dollar carries political risk.

That risk is now shaping behavior. The move away from the dollar is gradual and pragmatic, not dramatic. The greenback still dominates global trade and finance, but its share of official reserves has steadily declined. China and Russia have expanded trade in their own currencies. The BRICS countries continue to explore alternative settlement systems. Some Gulf energy transactions now take place outside the dollar. Even in Europe, firms have tested non-dollar structures for sensitive deals.

None of this signals an imminent collapse. It signals hedging. It reflects a world that no longer assumes the system is immutable.

The Venezuela episode adds weight to this instinct. A direct intervention followed by prosecution in a U.S. court reinforced the impression that American power is both global and personal. For large emerging economies such as India and Brazil, this raises uncomfortable questions. They are not adversaries of the United States, but neither are they clients. In a world where financial access can be restricted overnight, autonomy feels fragile.

Defenders of the dollar’s dominance are right to note that no rival currency offers comparable liquidity, transparency, or institutional backing. The euro is constrained by political fragmentation, the yuan by capital controls and governance concerns. The United States still hosts the world’s deepest financial markets and a legal system that remains a benchmark. A world without the dollar would be more expensive and more unstable.

But reserve currency status is not guaranteed by mechanics alone. It rests on trust. The dollar’s unique role depends on the belief that it is a reliable and largely neutral foundation for global commerce. When that belief erodes, alternatives gain appeal even if they are imperfect.

The domestic context makes this erosion more plausible. The United States is running large fiscal deficits with no clear plan for consolidation. Political polarization has become structural. Budget standoffs and institutional brinkmanship are now routine. From abroad, this looks less like healthy debate and more like volatility. For the issuer of the world’s reserve currency, predictability is power.

This is where strategy matters. Sanctions work because the dollar system is central. Overuse risks weakening that centrality. When financial pressure becomes the default response to geopolitical disagreement, the incentive to build workarounds grows. Allies may tolerate this. Non-aligned states will not.

Washington still has room to maneuver. It can reserve its financial weapons for truly exceptional cases. It can prioritize multilateral action over unilateral pressure. It can attend seriously to its own economic fundamentals, from fiscal discipline to investment in productivity and innovation. These are not abstract choices. They are the foundations of financial leadership.

The United States did not become the world’s monetary anchor by accident. It earned that role through stability, openness, and credibility. Those qualities still exist, but they require maintenance.

The events in Caracas will be remembered as a turning point for Venezuela. They may also mark another small but telling moment in the dollar’s longer story. Power, when exercised without restraint, invites resistance. Influence, when overplayed, encourages hedging.

The dollar will not be displaced overnight. It remains indispensable. But indispensability is not immunity. If American power is seen less as a stabilizing force and more as a partisan instrument, the quiet shift already under way will continue. There wil be more bilateral deals, more local currencies, and more gold in vaults. And there will be less reflexive reliance on the greenback. The dollar’s future will be shaped not only by markets and interest rates, but by whether American leadership is exercised with restraint, confidence, and a sense of shared responsibility.

This first appeared on FPIF.

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