BRICS leaders at their recent summit in New Delhi reiterated their commitment to reducing reliance on the US dollar in international trade and finance, while emphasizing that any shift away from dollar dominance will be gradual rather than abrupt. The meeting follows earlier discussions, including the 2023 BRICS summit where the Brazilian President proposed the idea of a common BRICS currency aimed at facilitating de-dollarisation.
The US dollar has long been the dominant global currency due to deep and liquid financial markets, extensive dollar-denominated assets, robust banking and payment networks, and strong investor confidence. These factors have created a difficult ecosystem to replicate, making the dollar the primary medium for global reserves, trade invoicing, investments, and international payments, even among countries with limited direct economic ties to the United States.
Nevertheless, growing geopolitical tensions, particularly the increasing use of financial sanctions by the US government, have motivated BRICS members and other nations to explore alternatives. Recent sanctions targeting countries such as Russia and Iran have heightened concerns about disruptions to international trade and financial stability. These challenges have underscored the need to diversify away from dollar dependence and develop payment mechanisms less reliant on Western infrastructure like the SWIFT network.
The BRICS New Delhi declaration acknowledged the complexity of substituting the dollar’s role, given the wide disparities among member economies in terms of inflation, monetary policies, exchange rate frameworks, capital controls, economic structures, and geopolitical interests. While China’s renminbi is sometimes viewed as a potential rival to the dollar due to China’s economic size and trade volume, experts caution that replacing one dominant currency with another would shift rather than resolve dependency issues.
Key requirements for a currency to achieve international status include broad convertibility, deep and liquid financial markets, reliable settlement mechanisms, credible institutions, and sustained investor confidence. These remain significant hurdles for the BRICS bloc, which currently lacks the unified financial infrastructure and economic homogeneity necessary to support a common currency or immediate dollar replacement.
Instead, the summit proposed a more pragmatic approach focused on expanding the use of national currencies in trade settlements where commercially feasible. This involves fostering interoperability among emerging alternative payment systems such as India’s Unified Payments Interface (UPI), Brazil’s Pix, Russia’s System for Transfer of Financial Messages (SPFS), and China’s Cross-Border Interbank Payment System (CIPS).
The New Development Bank (NDB), established by BRICS, could play a more prominent role by financing infrastructure and development projects through local currency lending and settlements, further supporting the move toward a diversified international financial system.
Overall, the BRICS summit conveyed that while full de-dollarisation may be a distant goal, incremental steps toward monetary diversification and enhanced local currency use could gradually reshape global trade and finance. This measured strategy reflects recognition of the existing dollar-centered ecosystem’s resilience and the considerable time needed to develop a viable alternative.