The Historical Evolution, Influencing Factors and Reform Directions of the International Monetary System

Summary: As an important component of the international system, the international monetary system has gone through the international gold standard system before World War II, and the Bretton Woods system and the Jamaica system after World War II. The Jamaica system has been in operation for nearly half a century and has many unjust and unreasonable aspects, urgently requiring reform. Multiple factors such as enhanced internal transformation drive, intensified geopolitical competition, and accelerated technological innovation will have a profound impact on the future evolution of the international monetary system. The international community needs to further enhance the efficiency of cross-border payments and monetary financial governance on the basis of maintaining the basic international monetary order established after World War II, explore the exercise of Special Drawing Rights as a supranational currency function, promote the formation of a benign competition and incentive and restraint mechanism where a few dominant sovereign currencies fulfill international monetary functions, reduce the excessive reliance of current international currencies on a single sovereign currency, and make the reform of the international monetary system more fair and reasonable. 

International currencies emerged due to international trade. They attracted the attention of early mercantilists when the geographical discoveries and the expansion of international trade partners occurred in the 15th century. They have a history of several hundred years. The international currency system is an important part of the international system, consisting of a series of international currency systems. Its formation and development are influenced by multiple factors such as the inherent laws of currency, the demands of the market economy, and geopolitical games. The international currency system has gone through three major stages: the international gold standard system before World War II, the Bretton Woods system and the Jamaica system after World War II. Among them, the main feature of the Jamaica system is that the "de-linked" sovereign credit currency is the main international reserve asset, and its fairness and rationality have been widely questioned. Facing the real challenges of intensified geopolitical games and accelerated market innovation, the international community should reach a consensus and promote the reform of the international currency system towards a more stable, more efficient, and more fair and reasonable direction.

The historical evolution of the international monetary system

International currency refers to the currency that serves as a general equivalent or performs the function of a general equivalent in the international market. The evolution of the international monetary system is the result of the combined effect of monetary and non-monetary factors in different periods. The operational characteristics of international monetary systems at different stages are not exactly the same. The international gold standard system, the Bretton Woods system, and the Jamaica system have, to a certain extent, promoted international economic and social development, but at the same time, they also exposed their respective problems, providing a reference for future reforms.

I. The single and chaotic international gold standard system 

Under the gold standard system, the international currency was relatively simple and did not truly form a system. The gold standard system referred to here is a generalized concept, including silver standard system, bimetallic standard system, gold standard system, and gold exchange standard system, etc. From the 15th century to the economic crisis of 1929-1933, the gold standard system persisted for several hundred years. During this period, precious metals served as supranational currencies and constituted the main content of the gold standard system. Apart from the International Clearing Bank (BIS) established in 1930, there were hardly any international monetary and financial organizations. During this time, the Dutch guilder and the British pound played important roles as international credit currencies. In the 17th century, due to trade, the Dutch guilder became an early international credit currency. From the late 18th century to the first half of the 20th century, the British pound became the international credit currency at that time because of its strong economic strength, developed financial markets, government credit endorsement (the United Kingdom was the first to establish a legal gold standard system in 1816), and political forces (such as the establishment of the pound zone). 

"Natural currencies" have inherent flaws. The international monetary order during the later stage of the gold standard system fell into chaos. As "natural currencies", precious metals have an automatic regulatory effect in stabilizing inflation and promoting the balance of international trade. However, they also have drawbacks such as rigid total supply, uneven geographical distribution, and restrictions on monetary policy. In the early 19th century, a de facto gold standard system was roughly established globally. The gold standard system persisted for about a hundred years before being widely abandoned by various countries during World War I, leading to severe currency inflation. Although the gold standard system was briefly restored after World War I, under the impact of the economic crisis from 1929 to 1933, various countries' currencies depreciated significantly, exacerbating the global economic crisis and accelerating the outbreak of World War II.

On July 2, 1944, British economist John Maynard Keynes delivered a speech at the Bretton Woods Conference held in New Hampshire, the United States.

II. The Transition from Chaos to Order: The Bretton Woods System 

The Bretton Woods system ended the disorderly situation of the pre-World War II monetary order institutionally, achieving significant results in global monetary and financial governance. In 1944, the Bretton Woods Conference was held, and international monetary governance underwent a transformation from each country acting independently to collective consultation, making a historic contribution to establishing the post-war international monetary order and achieving economic recovery and development. The main governance achievements of the Bretton Woods system include: through the "International Monetary Fund Agreement", promoting international exchange, stabilizing currency exchange rates, and assisting member countries in establishing a multilateral payment system, etc., establishing two major international financial organizations, the International Monetary Fund (IMF) and the World Bank (WB); determining the "dual pegging" system, that is, the US dollar is pegged to gold, and the currencies of other countries are pegged to the US dollar, forming an international monetary system centered on the US dollar. 

The world experienced a rare "golden period", but the international monetary system encountered the insoluble "Triffin Dilemma". The Bretton Woods system used gold as the "anchor" for the US dollar, essentially belonging to a generalized gold standard system. From 1944 to 1971, when the US dollar was "decoupled" from gold, the duration of the Bretton Woods system was less than 30 years. This system had its relative rationality, most notably manifested in the fact that "US dollars" or "US money" served as the international currency, and the issuance of US dollars was controlled by the "gold anchor", making the value of the US dollar relatively stable, and the global adoption of a fixed exchange rate system reduced the exchange rate risks in international trade. Historical records show that during the Bretton Woods system period, there were rare systemic risks in the global banking system, and the major economies in the world experienced a "golden period" of relatively high growth, low inflation, and low unemployment. Starting from the 1950s, global export trade grew at an unprecedented speed, and by the 1970s, global export trade volume increased by nearly 10 times. From the early 1960s to the early 1970s, the global per capita GDP growth rate was at a historically high level, basically remaining above 3%. However, the Bretton Woods system also had flaws and encountered the "Triffin Dilemma", where the US had to maintain the outflow of dollars to meet global liquidity demands while also restricting the outflow to maintain the stability of the US dollar credit. This system provided convenience for the US to conduct large-scale capital exports, expand economic influence, and transfer domestic crises, but it also exacerbated the credit crisis of the US dollar and global financial risks. Eventually, the Nixon administration of the United States had to announce the "decoupling" of the US dollar from gold in 1971, marking the collapse of this system.

III. The Troubling Jamaican System 

After the collapse of the Bretton Woods system, the international monetary system entered the Jamaica system stage. The establishment of the Jamaica system was marked by the "Jamaica Agreement" passed in 1976. The Jamaica system has been in existence for nearly 50 years, during which a series of international monetary reforms have been carried out, presenting new characteristics. First, the exchange rate arrangement has become diversified, and the floating exchange rate system, as an "automatic stabilizer", has gradually become the mainstream. Second, reserve currencies have been developing towards diversification, prompting gold to gradually withdraw from the international monetary system and enhancing the international reserve status of Special Drawing Rights. The US dollar, as a dominant sovereign currency, has become an important international reserve currency. Third, the international balance of payments adjustment mechanism has become diversified, allowing each country to make flexible decisions regarding the imbalance of international payments and adjusting it through various means such as exchange rate mechanisms, interest rate mechanisms, and capital financing mechanisms. The reform of the international monetary system has, to a certain extent, alleviated the problem of insufficient supply of a single reserve currency, providing flexible and diverse exchange rate system arrangements for the stable development of various economies. 

The Jamaican system belongs to a "de-anchored" credit currency system, which has many unfair and unreasonable aspects. Firstly, due to the lack of a hard constraint mechanism of "anchoring", the international currency is prone to causing excessive issuance of the sovereign credit currency that performs the function of an international currency, thereby exacerbating the global capital flow and international balance of payments imbalance. According to the statistics of the World Bank, in terms of current value in US dollars, the total global reserves excluding gold were 12.26 trillion US dollars at the end of 2024, which increased by 67.11 times compared to 0.18 trillion US dollars at the end of 1975, while the global GDP increased from 6.03 trillion US dollars in 1975 to 111.25 trillion US dollars in 2024, growing by 17.45 times. The proportion of total reserves excluding gold to GDP increased from 2.99% in 1975 to 11.02% in 2024. Secondly, influenced by various factors such as the comprehensive strength of the United States, market usage habits, path dependence, and network effects, the Jamaican system remains an international currency system centered on the US dollar. The dominant position of the US dollar has raised concerns among other countries. The International Monetary Fund data shows that as of the end of 2024, the share of the five major reserve currencies - the US dollar, the euro, the pound sterling, the Japanese yen, and the renminbi - was 57.79%, 19.84%, 4.73%, 5.81%, and 2.18% respectively. The objective status of the US dollar objectively grants the Federal Reserve the possibility of unlimited issuance of the US dollar and the unlimited liability of the US government, and easily spreads the resulting negative impacts to other regions of the world, causing financial turmoil in relevant countries (regions) and even globally. The US Treasury data shows that as of August 11, 2025, the total debt of the US federal government exceeded 37 trillion US dollars, accounting for approximately 126.8% of its GDP (29.18 trillion US dollars) in 2024. Thirdly, the organizational guarantee mechanism of the international currency system is not perfect, making it difficult to effectively address the institutional obstacles of the current international currency system. The International Monetary Fund and the World Bank are two major global international financial organizations, important achievements of the Bretton Woods Conference, but the United States has absolute control. This organizational guarantee system is obviously unfair and belongs to artificial intervention by non-monetary entities, exacerbating the global currency and financial governance deficit. Fourthly, some countries have de-economized financial products with public attributes, deepening the concerns of some countries about the Jamaican system. After the US dollar, the sovereign credit currency under the Jamaican system, became the international dominant currency, it has the attribute of a global public good. However, some countries have politicized, toolized, and weaponized financial products with public attributes, triggering concerns from other countries. For example, after the outbreak of the Ukraine crisis in 2022, the US and Western countries excluded some Russian banks from the SWIFT system, froze some of Russia's US dollar and euro assets overseas, causing significant difficulties in cross-border payments for Russia and economic damage.

From April 24th to 25th, 2025, the 51st International Monetary and Financial Committee (IMFC) meeting was held in Washington, the United States.

Influencing Factors of the Transformation of the International Monetary System

The international monetary system is both a complex system and an open system. It is not only constrained by the internal structure, state, and attributes of the system, but also influenced by the external environment. The Jamaica system, which has been in operation for nearly half a century, interacts with the global political and economic landscape. It has long been in a state of intense turmoil and multiple power struggles. The evolution of this system is affected by multiple factors such as the strengthening of internal transformational forces, the intensification of geopolitical games, and the acceleration of market technological innovation. 

(1)The internal driving force for the transformation of the international monetary system has strengthened. For centuries, the international monetary system has been in a state of continuous evolution. Humanity has been striving to find the correct path for the development of the international monetary system. The International Monetary Fund established Special Drawing Rights in 1969, and the euro was officially circulated in 2002, which are vivid examples of this. From a fair perspective, the international currency should be a super-sovereign currency that all countries trust and have a consensus on credit, and it should not be dominated by any single country. In other words, it is inappropriate for any country's sovereign currency to replace the super-sovereign currency to fully perform the functions of an international currency. Due to the intervention of sovereign countries' governments, sovereign countries often prioritize their own interests rather than maximizing global interests. From historical practice, sovereign currencies not only can play the role of international currencies, but can also coexist with super-sovereign currencies. Historically, gold and silver simultaneously served as super-sovereign currencies and coexisted for a long time. Historically, super-sovereign precious metal currencies and the Dutch guilder, the British pound, and the US dollar, among other strong sovereign currencies, also coexisted for a long time. From the current situation, the role of sovereign credit currencies as the main international currencies under the Jamaica system is already worrying. The 2008 international financial crisis and the 2009 European debt crisis both originated from currency issues. The international community still remembers the spillover impact of these issues on global finance and economy. Now, some countries (regions) not only fail to seriously learn from historical lessons but continue to have high debts, pushing up the expectations of the international community to fundamentally change the dominance of individual sovereign credit currencies in the international monetary system. More and more scholars believe that the underlying logic of the current single-currency-dominated international monetary system is difficult to fundamentally solve the deep-seated problems such as excessive international currency issuance, intense exchange rate fluctuations, and international balance of payments imbalances. The internal driving force for the transformation of the international monetary system has significantly strengthened. In June 2025, the governor of the People's Bank of China, Pan Gongsheng, delivered a keynote speech at the Lujiazui Forum, mentioning that theoretically, Special Drawing Rights can better overcome the inherent problems of a single sovereign currency as the international dominant currency and have the characteristics of becoming a super-sovereign international currency. Some domestic and foreign scholars also called for that the international monetary system should be composed of diversified sovereign credit currencies. In 2025, the 51st International Monetary and Financial Committee (IMFC) of the International Monetary Fund adopted the "Delraye Declaration", emphasizing "strengthening the governance of the International Monetary Fund to enable it to continue to effectively promote member states to reach consensus to address global challenges".

(2)Geopolitical competition has intensified. Money is not merely an economic issue. In 1905, German economist Georg Friedrich Knapp proposed in his book "The Theory of Monetary Nationalism" that "money is a product of the state". In 2024, American economist Patrick Bolton stated in "The Nature of Money" that "money represents the sovereignty of the state". Money has a natural connection with sovereignty, and international currencies operate between sovereign states. The Bretton Woods Conference in 1944 ultimately adopted the "White Plan" of the United States rather than the "Keynes Plan" of the United Kingdom as its blueprint, reflecting the influence of the United States' hegemonic politics at the end of World War II on the establishment of the global monetary and financial order. In 2025, it marks the 80th anniversary of the end of World War II. With the collective rise of global southern countries, the global geopolitical landscape has undergone profound changes, and the international monetary system has shown a trend of transitioning from a "center-periphery" structure to a "multipolar" one. Currently, geopolitical hotspots are frequent in the world, with the Ukraine crisis and the Israeli-Palestinian conflict remaining unresolved, and the intensification of major power competition has become an important driving force for the reform of the international monetary system. Many countries are worried about the damage to the reserve assets denominated in the sovereign credit currencies of other countries and the politicization of public attributes of financial tools, and are seeking bilateral and regional currency cooperation, hoping for the reform of the international monetary system. The Trump administration of the United States not only disregarded the rules of the World Trade Organization, but also imposed tariffs worldwide, seriously disrupting the global trade order, and violated international law principles, arbitrarily taking financial sanctions measures, causing international society to have panic over holding assets denominated in the current dominant international currency, the US dollar.

(3). Market technological innovation is accelerating. Financial development cannot be separated from technological innovation, and technological innovation promotes financial progress. In the historical process of the evolution of the international monetary system, the carrier of international currencies has changed from physical precious metals to paper certificates and then to electronic currencies. The settlement methods of international currencies have become increasingly safe, fast, low-cost, and traceable, fully demonstrating the promoting effect of the power of financial technology on the continuous progress of the international monetary system. The emergence and rise of stablecoins at present indicate that market forces represented by financial technology companies are challenging the formal finance and the monopoly system of monetary sovereignty, forcing the international monetary system to accelerate reform. First, the emergence of stablecoins stems from technological innovation in finance. Stablecoins were born in 2014 and are the products of financial technology including decentralized finance (DeFi) and Web3.0. They are market-issued cryptocurrencies and belong to a category of crypto assets. They are a cryptocurrency anchored to a specific value target (such as fiat currency, commodities, crypto assets, or algorithmic mechanisms), and essentially are a "digital rights certificate" composed of "technical protocols + legal statements". Stablecoins are not legal tender, and the public can choose whether to accept them. The 2025 "Guidance and Establishment of the National Innovation Act for Stablecoins in the United States" clearly states that "payment stablecoins are a digital asset and do not belong to the national currency". The 2025 Hong Kong "Stablecoin Ordinance" also clearly states that "digital assets issued by the central bank, issued by entities performing the functions of the central bank, issued by entities authorized by the central bank on behalf of the central bank, or issued by an entity authorized by a certain jurisdiction's government, and certain assets with specific purposes" are not stablecoins. Second, the rise of stablecoins stems from market demand. The rapid development of virtual economies and certain informal economies such as non-fungible token (NFT) transactions and in-game purchases in the metaverse has created more usage scenarios for stablecoins. The low cost and high efficiency brought by "point-to-point, payment as settlement" brought by stablecoins are favored by some enterprises and individuals in the market. As of 2024, the total supply of mainstream stablecoins worldwide amounts to 203.8 billion US dollars, an increase of over 22 times compared to 2019. Third, the emergence of stablecoins helps promote the current international monetary system to embrace technological innovation in finance. Although the application scope of stablecoins is expanding, the supply of stablecoins is currently only in the range of hundreds of billions of US dollars. Even if it reaches trillions of US dollars, it is still not a magnitude compared to the broad money supply (M2) of global sovereign credit currencies in the trillions of US dollars. Therefore, the international community does not need to exaggerate the effect of stablecoins. Stablecoins, as a new payment technology tool, is also a driving force for stimulating financial innovation and promoting formal finance development. Stablecoins are the specific application of financial technology in the field of currency, catering to the investment or speculative behavior psychology of market audiences chasing stability, and is a microcosm of market financial innovation. At the same time, stablecoins will promote financial technology to empower the international monetary system, promote the prompt appearance of central bank digital currencies (CBDC) and even super-sovereign digital currencies, and push for the reform of the international monetary system.

On June 18, 2025, the 2025 Lujiazui Forum opened in Shanghai

The Reform Direction of the International Monetary System

The evolution of the international monetary system indicates that no stage of the international monetary system has been perfect. The current reform of the international monetary system should, based on summarizing historical experiences and lessons, rationally address current challenges and develop in a more fair and reasonable direction. China should demonstrate its sense of responsibility and actively implement global governance initiatives, contributing Chinese wisdom and solutions to promoting the reform of the international monetary system. 

I. Promote a more stable international monetary system 

Maintain the basic international monetary order established after World War II. Ensure the continuity and stability of the international monetary system, guarantee the normal operation of the International Monetary Fund and the World Bank, and continue to implement a managed floating exchange rate system based on market supply and demand and with stability as the overall goal. 

Continuously improve the multi-level monetary and financial safety net. Support the International Monetary Fund in playing a core role among various international financial organizations, continuously enhance the crisis rescue capabilities, support the European Financial Stability Facility, the Latin American Reserve Fund, the Asian Chiang Mai Initiative, the Arab Monetary Fund and other institutions to become important supports for the financial stability of relevant regions, support bilateral currency swap mechanisms to become an important component of the global financial safety net. Support the Financial Stability Board (FSB) in supervising global systemic financial risks, promote the implementation of the Basel III Accord, and continuously improve the crisis prevention system based on regulatory rules.

II. Promoting a More Efficient International Monetary System 

Further enhance the efficiency of cross-border payments. Support the diversified development of the cross-border payment system, promote the international use of more currencies, and encourage more countries and regions to use their own currencies for settlement, changing the situation where a single sovereign currency dominates cross-border payments. Support the diversification of settlement channels to meet the flexible and diverse needs of currency payment and settlement in various countries, including traditional agency bank models, emerging cross-border payment systems, regional multilateral payment systems, etc. Draw on stablecoin technology to promote the accelerated joint development of central bank digital currencies of various countries and demonstrate more contributions in improving cross-border payments. Explore better leveraging the role of the International Monetary Fund, and explore the development of a new, more secure, more efficient, more economical and traceable global payment and clearing system as a public product based on the central bank digital currencies of various countries. 

Promote more efficient monetary and financial governance. Make use of the advantages of multilateral platforms such as the United Nations and the G20, carry forward the spirit of unity from the Bretton Woods Conference, and strengthen communication and coordination on key issues such as the formulation of international monetary rules, supervision of cross-border capital flows, and resolution of international balance of payments disputes. Continue to implement the "Roadmap for Strengthening Cross-Border Payments" approved by the G20 leaders in 2020, promote the interconnection of payment systems, and coordinate the compliance and stability of cross-border payments under different legal and regulatory frameworks. Continuously monitor the development trends of global central bank digital currencies and stablecoins, cryptocurrencies, and digital assets, emphasizing that "on the blockchain is not a lawless place", and strengthening the construction of relevant standards and international regulatory cooperation. Keep pace with the times to promote the reform of the governance of international financial organizations, improve the voting and decision-making mechanism, and enhance the efficiency of monetary and financial governance.

III. Promoting a More Fair and Reasonable International Monetary System 

Explore the exercise of Special Drawing Rights to assume the function of a supranational currency, fundamentally reducing the unfair and unreasonable nature of sovereign credit currencies serving as international currencies. Although countries currently have difficulty reaching a consensus on this at the political level, this might be the "optimal solution" for the reform of the international monetary system. Explore the upgrading of the international monetary function of Special Drawing Rights, so that it goes beyond merely remaining at the level of book assets and international reserve functions. Draw on the ideas of the "Keynes Plan", study and explore the "issuance anchor" and "value anchor" of Special Drawing Rights, making the issuance volume of international currencies stable and meeting the needs of international trade and economic development. The value of international currencies should be stable and not deviate from the "intrinsic value". Explore the linking of national sovereign currencies with Special Drawing Rights, and widely use Special Drawing Rights in international trade and investment activities, including issuing bonds denominated in Special Drawing Rights, etc., to promote Special Drawing Rights to become the main pricing and settlement currency for international use. 

Promote the establishment of a favorable competition and incentive-restraint mechanism for a few dominant sovereign currencies to fulfill international monetary functions, and reduce the current excessive reliance of international currencies on a single sovereign currency. Although this is not the "optimal solution", it might be a "satisfactory solution" for the reform of the international monetary system. Looking at the history of currency development, international currencies have a monopolistic attribute, and only a few sovereign currencies have successfully internationalized. According to the 2020 report of the International Monetary Fund, there are approximately 180 sovereign credit currencies in the international monetary system, but only a few can serve as international currencies. If the idea of constructing a supranational currency is difficult to implement, the future evolution of the international monetary system towards the coexistence, competition, and mutual restraint of a few sovereign currencies may become a more realistic choice. Whether it is a single sovereign currency or a few sovereign currencies serving as the dominant international currencies, sovereign currency countries need to undertake corresponding public service responsibilities, strengthen domestic fiscal discipline and financial supervision, and prevent currency competition from leading to devaluation. Promote the reform of the IMF's quota, special drawing rights currency basket and its weight composition, so that it can better adapt to the needs of global economic and trade development and better represent the interests of the widest range of countries, including the Global South, and maintain and practice true multilateralism. From a practical perspective, the opportunities and challenges of international monetary system reform coexist, and there is still a long way to go. (Author: Xu Deshun, Researcher of the International Trade and Economic Cooperation Institute of the Ministry of Commerce)