BRICS currencies lack practicality as a replacement for the US dollar
In the realm of global finance, the BRICS nations—Brazil, Russia, India, China, South Africa, and recent additions like Egypt and Iran—are making strides towards reducing their reliance on the US dollar, a movement known as de-dollarization. However, the ambition of replacing the dollar with a new single currency remains elusive [1][2][4][5].
At the heart of this shift is an emphasis on local currencies and the development of alternative payment systems. For instance, China and Russia have established a ruble-yuan trade mechanism that now facilitates about 65% of their bilateral trade [2][4]. Similarly, other BRICS nations are increasing the use of their national currencies in cross-border payments, with the renminbi being used in 50% of intra-Brics trade, compared to only 2% in global payments in May 2025 according to SWIFT [3].
The idea of a shared BRICS reserve currency, such as the proposed gold-backed "Unit," has been floated, most notably at the 2024 BRICS Summit in Kazan [1]. Yet, this concept remains conceptual and faces significant economic and institutional challenges.
Initiatives like the blockchain-based BRICS Pay system aim to establish alternatives to the SWIFT messaging system for cross-border payments, reducing dependence on dollar-dominated global financial networks [1][5]. However, the development and implementation of such systems are still under discussion, and no mechanism has been devised or vehicle currency mandated for settling imbalances.
Economic and geopolitical factors also play a role in the pace of de-dollarization. While Russia and China actively promote de-dollarization partly to avoid US sanctions, India and Brazil remain cautious due to their closer economic ties with the US [5].
The New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA) aim to support emerging economies with funding and liquidity in local currencies. However, their current influence remains limited due to scale and institutional maturity [4].
It's important to note that potential alternatives to the US dollar as a global currency centre on a multipolar system of reserve currencies rather than one single global replacement. Gold, local currencies, and blockchain-based payment systems are all being considered as part of this shift [3].
As the discussions about de-dollarization continue, it's clear that the BRICS nations are making progress towards a more multipolar global currency system. Yet, the structural challenges and geopolitical balancing act mean that rapid wholesale shifts are unlikely [1][2][4][5].
References:
- The Diplomat
- Financial Times
- Bloomberg
- Reuters
- The Guardian
- The ambition of replacing the US dollar with a new single currency among the BRICS nations remains conceptual, but the focus on local currencies and alternative payment systems, such as the blockchain-based BRICS Pay, presents an emerging trend in global finance governance.
- The development and implementation of the BRICS Pay system, which aims to establish alternatives to the SWIFT messaging system, carries a risk due to its ongoing discussion stages and the lack of a mandated vehicle currency for settling imbalances.
- Research into potential alternatives to the US dollar as a global currency reveals a shift towards a multipolar system of reserve currencies, including gold, local currencies, and blockchain-based payment systems, like the proposed gold-backed "Unit."
- While various initiatives, such as the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA), aim to support emerging economies with funding and liquidity in local currencies, their current influence might not be sufficient to catalyze significant changes in the global finance landscape.
- Sovereign nations, like India and Brazil, may embrace de-dollarization at varying paces due to economic and geopolitical factors, with some cautiously engaging in this movement due to closer ties with the US and others actively pursuing de-dollarization to mitigate the risk of US sanctions.
