By Marc Jones

LONDON (Reuters) – Suggestions that the dollar’s dominance of the global financial system is coming to an end are wide of the mark, JPMorgan said on Wednesday, despite some drastic signs of change in commodity markets and some trading blocs.

The rise of China and the imposition of economic sanctions on countries such as Russia mean there is a diversification trend away from the dollar, JPMorgan said, but the reasons for the US currency’s dominance remain “deep-rooted and structural”.

It highlighted rising dollar-denominated bank deposits in emerging markets, the performance of sovereign wealth funds and foreign non-reserve assets, saying this “more than” offsets the long-term decline in the value of the dollar in overall emerging market foreign exchange reserves.

The dollar’s ​​share of total global liabilities continues to rise thanks to record debt issuance, and even talk of de-dollarization in China appears “exaggerated,” despite geopolitical rivalry.

“A significant erosion of the dollar’s ​​dominance will likely take decades, and the decline in the dollar’s ​​share of global trade and overall foreign exchange reserves should not be confused with de-dollarization,” the investment bank said in a report.

Significant changes are taking place in commodities markets, for example, where oil is increasingly being traded in currencies other than the US dollar, and demand for gold from central banks and emerging market consumers has soared.

The bank argued that the “most underestimated risk to the hegemony of the US dollar” is the possible fragmentation of the international payments system in which the dollar has long held omnipotence.

China and India are the world leaders in e-commerce innovation and activity, while the US and Western Europe currently have less than 30% share.

Washington’s utilize of tough financial sanctions means Russia, China and other countries are creating alternatives to the SWIFT banking payments system.

Dozens of central banks are testing fresh digital versions of their national currencies that could make it easier to bypass the U.S. banking system.

“The private sector’s genuine confidence in the dollar as a store of value appears unquestionable,” JPMorgan said in a report.

“However, we are witnessing greater diversification and significant changes in cross-border transactions as a result of sanctions against Russia, efforts by China to strengthen its use of , and geoeconomic fragmentation.”