Reserve currency status is not assigned by decision: it develops through practice. A currency becomes reserve if its issuer has a large economy, developed and open financial markets, stable institutions, and the currency itself is freely convertible and widely accepted in international transactions.
The importance of this status lies in confidence: central banks are willing to hold reserves in such a currency because they rely on its liquidity and value preservation when reserves are needed.
For emerging market economies, reserve currencies serve a practical role: external debt is denominated in them, a significant portion of foreign trade settlements occurs in them, and typically a large part of reserves are held in them alongside gold.
For private investors, reserve currency status does not guarantee protection from losses. Such currencies are also subject to inflation, and their exchange rate fluctuates. They reduce the risk of exchange restrictions and the risk of sudden liquidity loss, but do not guarantee preservation of purchasing power.