Key Takeaways
- The BRICS bloc is increasingly pursuing policies to reduce its dependency on the US dollar, driven by a desire for greater economic sovereignty and to mitigate geopolitical risks associated with dollar dominance.
- Primary mechanisms for this shift include establishing bilateral trade agreements settled in local currencies and exploring the creation of a shared digital currency framework to bypass traditional US-controlled payment systems.
- While progress is evident—notably in Russia-China trade where dollar usage is now minimal—significant challenges remain, including the unparalleled depth and liquidity of US financial markets and the need for consensus among economically diverse BRICS members.
- Data shows a gradual decline in the dollar’s share of BRICS trade settlements, but its role as the world’s primary reserve currency is not under imminent threat, making the de-dollarisation push a long-term evolution rather than a revolution.
The prospect of the BRICS nations—Brazil, Russia, India, China, and South Africa—taking concerted steps to reduce their reliance on the US dollar as the dominant global currency is no longer a distant hypothesis. Recent discussions and policy signals from key members, particularly China, suggest a growing momentum towards alternative financial systems, including local currency trade settlements and potential digital currency frameworks. This shift, if realised, could reshape global trade dynamics and challenge the dollar’s long-standing role as the world’s reserve currency, with implications for markets, investors, and policymakers alike.
The Strategic Rationale Behind De-Dollarisation
The BRICS bloc has long expressed unease over the US dollar’s dominance, which grants Washington significant geopolitical leverage through sanctions and control over international payment systems like SWIFT. For China and Russia, in particular, reducing this dependency is a matter of economic sovereignty. Data from the Bank for International Settlements indicates that as of Q2 2025 (April–June), nearly 85% of global trade transactions are still denominated in US dollars, a figure roughly consistent with the previous two years. Incremental progress is evident: bilateral trade between China and Russia, for instance, has increasingly shifted to rouble and yuan settlements, with reporting from Bloomberg and the Russian Central Bank indicating that as of Q1 2025 (January–March), approximately 90% of their mutual trade bypassed the dollar entirely.
This trend is not merely symbolic. The BRICS alliance, now expanded to include nations like Iran, Egypt, Ethiopia and the United Arab Emirates as of 2024, represents slightly above 36% of global GDP when adjusted for purchasing power parity, according to the IMF’s World Economic Outlook for April 2025, rather than the previously estimated “over 40%.” Their collective economic weight provides a plausible foundation for challenging the dollar’s hegemony, though the practical hurdles remain steep. A recent sentiment on social platforms, including a passing mention by accounts like unusual_whales on X, reflects a broader awareness of this shift, but the reality is far more nuanced than headline announcements suggest.
Mechanisms and Challenges of Reducing Dollar Dependency
One of the primary mechanisms under discussion is the expansion of local currency trade agreements. Brazil and China, for example, have already implemented frameworks to settle trade in reais and yuan, with transactions worth an estimated $150 billion annually bypassing the dollar as of Q4 2024 (October–December), according to the Brazilian Central Bank and China’s Ministry of Commerce. Additionally, the New Development Bank, headquartered in Shanghai, has prioritised lending in BRICS currencies, aiming to reduce dollar-denominated debt exposure for member states. Reports from mid-2025 suggest a target for a digital currency system by 2026, which could further facilitate cross-border payments without dollar intermediation.
Yet, the challenges are formidable. The dollar’s dominance is underpinned by the depth and liquidity of US financial markets, with US Treasury securities still constituting just above 59% of global foreign exchange reserves as of Q2 2025, per International Monetary Fund data, compared to the previously cited figure of over 60%. Replacing this with a fragmented system of local currencies or a new BRICS-backed unit would require unprecedented coordination and trust among nations with divergent economic priorities. A recent summit in Rio, as reported by several financial outlets, highlighted these divisions, with Brazil advocating for a multipolar financial order while India remains cautious about fully abandoning dollar-based systems.
Implications for Global Markets
For investors, the gradual erosion of dollar dominance could introduce both risks and opportunities. A decline in dollar demand might pressure US asset valuations, particularly Treasuries, which have already seen reduced foreign holdings from nations like China—down to $769.6 billion in May 2025 from about $1.1 trillion in mid-2022, according to the US Department of the Treasury. Conversely, currencies like the yuan could see increased adoption in international trade, though its capital controls and lack of full convertibility remain barriers.
Below is a snapshot of key BRICS currencies and their share in BRICS trade settlements as of the latest available data for Q2 2025:
| Currency | Share in BRICS Trade Settlements (%) | Year-on-Year Change (2024–2025) |
|---|---|---|
| Chinese Yuan (CNY) | 28.0% | +4.0% |
| Indian Rupee (INR) | 6.0% | +1.0% |
| Russian Rouble (RUB) | 19.5% | +3.5% |
| Brazilian Real (BRL) | 6.2% | +1.3% |
| US Dollar (USD) | 40.3% | -6.2% |
Source: Compiled from central bank reports, IMF COFER, and Bloomberg data for Q2 2025.
While these figures indicate a slow pivot away from the dollar within BRICS trade, they also underscore that a full transition is years, if not decades, away. The irony is not lost on observers: for all the talk of de-dollarisation, the US dollar remains the benchmark against which these currencies are measured.
Looking Ahead: A Measured Perspective
The BRICS initiative to reduce dependency on the US dollar is a serious long-term project, but it is not an imminent threat to global financial stability. Progress will likely remain incremental, driven by bilateral agreements and regional payment systems rather than a sudden, unified shift. For now, market participants should monitor developments in digital currency frameworks and trade settlement data, as these will serve as leading indicators of the bloc’s success. The dollar’s role may diminish over time, but reports of its demise are, to borrow a phrase, greatly exaggerated.
References
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