The sanctions placed on Russia over its invasion of Ukraine could erode the dominance of the US dollar and spur the adoption of digital currencies, according to a top IMF official.

Stringent Western financial sanctions have frozen much of Russia’s foreign assets and hit its ability to trade. While that has underlined the dollar’s power as the dominant global reserve currency, it has also been a wake-up call for countries about relying on it too heavily.

Gita Gopinath, first deputy managing director at the IMF, said there are signs some countries are already renegotiating the currency they are paid in for international trade.

“The dollar would remain the major global currency even in that landscape, but fragmentation at a smaller level is certainly quite possible,” Gopinath told the Financial Times in an interview published Thursday.

Small currency blocs between some trade partners are starting to emerge, she added.

As countries accumulate reserves in the currencies they use for trade, these will take on a bigger role, which will dilute the dominance of the dollar.

The US currency’s clout has already waned over the last two decades, and its share of international reserves has fallen from 70% to 60%, according to the IMF official. Australia’s dollar and China’s yuan, in particular, have made inroads as trading currencies.

More than 70 central banks hold some yuan as a reserve currency, and many African countries and some in the Middle East regularly use the Chinese currency for transactions, according to Baizhu Chen, professor of clinical finance and business economics at the University of Southern California.

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