BRICs currencies fail to establish a viable challenge against the U.S. dollar's dominance
BRICS Nations Move Towards De-dollarization in Global Trade and Finance
The BRICS nations are making significant strides in their efforts to reduce their reliance on the US dollar in global trade and finance. At the 2025 BRICS summit in Rio de Janeiro, the 20 members and partners emphasized the expansion of local currency financing via the New Development Bank (NDB), the enhancement of the Contingent Reserve Arrangement (CRA) as an IMF alternative, and the pursuit of cross-border payment interoperability to facilitate fast, low-cost transactions in local currencies rather than dollars, euros, or pounds.
Key ongoing projects include strengthening the NDB to support development in local currencies, developing the CRA for short-term liquidity support independent of IMF rules, promoting the New Investment Platform (NIP) and BRICS Interbank Cooperation Mechanism (ICM) for investments and financing using local currencies, and advancing the BRICS Cross-Border Payments Initiative and Payment Task Force to enable efficient, transparent, and secure payment systems within BRICS and partners.
Individual BRICS members are also shifting their trade practices. For example, Russia trades predominantly in rubles and yuan with China, India explores rupee settlements for oil, while Brazil and South Africa bolster gold reserves and discuss a basket-backed BRICS currency.
The rise of central bank digital currencies (CBDCs) also plays a strategic role. China’s digital yuan (e-CNY) is integrated into cross-border projects such as the Belt and Road Initiative, presenting a credible alternative digital payment system to the US dollar globally. Over 130 countries are exploring CBDCs, signaling a broader shift away from dollar-based systems.
However, the US dollar retains significant dominance, especially in private transactions and digital financial networks. Dollar-backed stablecoins like Tether (USDT) counterbalance BRICS de-dollarization by maintaining dollar liquidity in the global digital economy. In response, BRICS is focused on building localized financial infrastructure and governance institutions, moving from confrontation towards cooperative frameworks such as the BRICS Multilateral Guarantees Initiative.
Challenges remain given the entrenched use of the dollar as the primary reserve currency, deeply rooted financial networks like SWIFT, and the dollar’s role as the world’s safest asset—even as US gross debt surges and credit ratings decline, which may encourage further diversification away from USD. Additional emerging efforts include alternative payment systems like Project Embridge aimed to bypass SWIFT and Western correspondent banks, although some initiatives face geopolitical pushback such as alleged sabotage by entities like the Bank for International Settlements.
In summary, the BRICS de-dollarization strategy is maturing fast, emphasizing institutional development, local currency use, digital payments, and alternative financing mechanisms to challenge dollar dominance gradually. However, the dollar remains strongly entrenched in global finance, and significant systemic shifts will require sustained effort against resilient established frameworks.
| Aspect | Details | |-----------------------------------|-----------------------------------------------------------------------------------------------------------------------| | Key BRICS institutions | New Development Bank (NDB), Contingent Reserve Arrangement (CRA), New Investment Platform (NIP), Interbank Cooperation | | Payment systems | BRICS Cross-Border Payments Initiative, BRICS Payment Task Force aiming for interoperability and low-cost transfers | | Currency diversification | Trade settlements in rubles, yuan, rupees; gold reserves; potential basket-backed BRICS currency | | Digital currency alternatives | China’s digital yuan (e-CNY) integrated in Belt and Road, broad CBDC exploration worldwide | | Counterforces | Dollar-backed stablecoins (USDT), entrenched dollar dominance in private and digital sectors | | Geopolitical context | US debt levels rising, reduced foreign appetite for USTs may weaken USD reserve status; opposition from Western actors |
- AI insights from financial research suggest that the BRICS' shift towards de-dollarization could lead to a significant emerging trend in global trade and finance governance.
- The pursuit of cross-border payment interoperability and local currency financing via the NDB, CRA, and other BRICS initiatives are key AI-driven insights in the investing world.
- Given the rising exploration of central bank digital currencies (CBDCs) like China's digital yuan (e-CNY), there's a growing data-based argument for businesses to reassess their risk management strategies in the context of de-dollarization.
- Sovereign nations seeking to de-dollarize, such as the BRICS members, are increasingly focusing on developing localized financial infrastructure and institutions, as revealed by recent research findings and data analysis.
- While the dollar maintains its dominance, the growing use of alternative payment systems like Project Embridge and the proliferation of CBDCs across 130+ countries indicate an insights-driven response from emerging economies to the challenges of de-dollarization and dollar-backed stablecoins like USDT.
