BRICS’ dollar dilemma: Why de-dollarisation is easier to talk about than deliver

‘De-dollarisation’ as a term may be decades old, coined way back in the 1960s by an economist Robert Triffin, but Trump has given this decade-old term a fresh geopolitical charge and given this term a political life of its own. But despite all the discussions spanning over years, moving away from the world’s reserved currency is far easier said than done. 

There is a striking paradox at the heart of the debate. The world is talking more loudly than ever about moving away from the dollar, but the dollar itself remains deeply embedded in global finance. The dollar still sits at the centre of nearly nine out of every 10 foreign-exchange trades, according to the Bank for International Settlements. Despite the growing talk of de-dollarisation, the dollar’s grip on global finance remains remarkably strong. 

The latest numbers from the Bank for International Settlements (BIS) underline the scale of the challenge. The US dollar was on one side of 89.2 per cent of all foreign-exchange trades in April 2025, up from 88.4 per cent in 2022. By comparison, the Chinese renminbi accounted for 8.5 per cent of global FX turnover.

In other words, the conversation around de-dollarisation may be accelerating faster than the actual process. And that is where the distinction between de-dollarisation and diversification becomes crucial. The dollar is losing some ground. There is evidence that the dollar’s dominance is being diluted in some areas.

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The dollar’s share of global official foreign-exchange reserves has fallen substantially from the levels seen in the late 1990s. But the more recent data also show why claims of an imminent collapse of dollar dominance need to be treated cautiously.

According to the IMF’s latest available COFER data, the dollar accounted for 57.13 per cent of global foreign-exchange reserves in the first quarter of 2026, up from 56.42 per cent in the previous quarter. The IMF has also cautioned that exchange-rate movements can significantly affect these reported shares.

So, there is movement away from the dollar at the margins. But there is no evidence of a wholesale abandonment of it.

“There has been a gradual reduction in the share of the dollar in the global reserve stock. The most likely outcome is not de-dollarisation but less exclusive dollarisation,” Radhika Rao, India economist and chief executive director of Singapore’s largest bank DBS, told Firstpost.

“A growing share of trade and regional financial flows is being settled in alternative currencies, especially yuan. So in a decade ahead, it might not be wrong to assume that the share of the dollar might moderate further. At the same time, the ECB seems to have warmed up to the idea that the euro can be a potential alternative,” Rao added.

That distinction — less exclusive dollarisation rather than the end of dollarisation — may ultimately prove to be the more accurate description of where the global financial system is heading.

The numbers & a complicated story

The data ultimately offer a more nuanced picture than the political rhetoric. The dollar remains overwhelmingly dominant in foreign-exchange trading. The BIS says it was involved in 89.2 per cent of all FX trades in April 2025.

At the same time, the renminbi is gaining ground, reaching 8.5 per cent of global FX turnover.

And the dollar’s share of official reserves is well below its late-20th-century levels, even though it remains comfortably ahead of every other currency. The IMF’s latest data put the dollar’s reserve share at 57.13 per cent in the first quarter of 2026.

These trends are not contradictory. They suggest a financial system that is becoming more diversified without becoming post-dollar.

The dollar can lose some share of reserves while retaining an overwhelming position in payments and FX markets. The yuan can become more important without becoming a reserve-currency equivalent of the dollar. And BRICS can increase local-currency financing without creating a common currency.

The yuan rises

If there is one currency that has emerged as the most visible beneficiary of the diversification trend, it is the Chinese yuan. The renminbi’s share of global FX turnover rose to 8.5 per cent in 2025, making it one of the world’s fastest-growing major currencies in foreign-exchange markets.

China and Russia have also pushed aggressively towards bilateral trade settlement in their national currencies, particularly after Western sanctions dramatically altered the financial architecture surrounding Russia. But a growing yuan footprint does not automatically translate into a yuan-led global monetary order.

Amitendu Palit, Senior Research Fellow and Research Lead (Trade & Economic Policy) at the Institute of South Asian Studies, National University of Singapore, argues that the debate over de-dollarisation is still being framed too prematurely.

The US accounts for only around 13-15 per cent of global trade, he notes, but the dollar’s role in international trade and finance is several times larger. That reflects the currency’s outsized role in global invoicing, payments and financial markets.

This is the central advantage the dollar continues to enjoy: the dollar is not merely America’s currency; it is embedded in the infrastructure of global finance. Moving away from it therefore requires much more than political intent. Countries need liquid alternative markets, trusted payment systems, deep capital markets, reliable settlement mechanisms and currencies that others are willing to hold. That is a much higher bar.

BRICS: No formal war on the dollar

There is another important misconception surrounding the debate. BRICS has discussed reducing dependence on the dollar for years, but it has never formally adopted a policy of eliminating the dollar from global trade.

At the 2009 BRIC summit in Yekaterinburg, the leaders called for a more diversified international monetary system. Since then, the discussion has evolved from a broad critique of the existing monetary order towards more practical questions about local-currency settlement, development financing and cross-border payments.

This matters because the BRICS countries themselves are far from being aligned on what should replace the dollar — or whether anything should replace it at all.

Mihaela Papa, Director of Research and Principal Research Scientist at the MIT Center for International Studies, puts the dilemma succinctly.

“A few years ago, my colleague, who is now at the Council on Foreign Relations, and I wrote a volume on whether Brics could de-dollarise the global financial system. We got a lot of criticism: do not use ‘de-dollarisation’; use ‘diversification’.”

“In a way, there is de-dollarisation in the sense of moving away from the dollar to reflect that there is a multi-currency world to a larger extent than was before.” That is perhaps the most realistic way of looking at the BRICS project. Not a sudden monetary revolution. Not the disappearance of the dollar. But a gradual attempt to create more options around it.

For BRICS, the most consequential part of the debate may not be currencies at all. It could be payments. Papa sees the greatest potential for progress in the creation of interoperable cross-border payment systems.

“Basically, Brics could create a system of cross-border payments and the interoperability of domestic payment systems. The reason for that is that this can be done in a decentralised way. It does not require a joint currency that Brics cannot decide to adopt because politically that would be impossible.”

That is particularly relevant to India’s approach. India has been pushing for greater interoperability between digital payment systems and has advocated a framework that would allow BRICS members to use their own currencies and payment infrastructure while making cross-border transactions faster and cheaper.

Reuters reported ahead of the 2026 BRICS summit in New Delhi that India was advocating the integration of central-bank digital currencies among BRICS countries to facilitate cross-border payments. The proposal is designed to make transactions easier rather than create a new currency to replace the dollar. This is a subtle but important shift.

Instead of asking “What replaces the dollar?”, the more practical question becomes “How can countries transact without having to rely on the dollar for every transaction?” That is a much more achievable proposition.

India Rejects a Chinese-Dominated BRICS 

For India, the distinction is also strategic. Harsh Pant, Vice President at the Observer Research Foundation, says India’s position on de-dollarisation has been clear: New Delhi is not a major supporter of de-dollarisation as a broad geopolitical project.

“What India finds more productive is bilateral dealings in local currencies rather than any meta-narrative on de-dollarisation.”

The reason is straightforward. “De-dollarisation would mean asking what the other more powerful currency is. The most important and powerful economy at this point in Brics is China. Now, the question is whether India would want to replace American economic hegemony with Chinese economic hegemony. I don’t think that’s something India would like to do. “That concern explains much of India’s careful positioning.

India has an obvious interest in reducing excessive dependence on any single financial system. But that does not mean it wants BRICS to become an explicitly anti-American economic bloc or a mechanism for expanding China’s monetary influence. “India would be very cautious. The idea would be that there should be local currency transactions bilaterally,” Pant says.

That approach also gives other BRICS members more room to manoeuvre. “You will have countries like the UAE, Egypt, Ethiopia and South Africa, which may want to talk about local currency transactions rather than de-dollarisation per se.”

Brics common currency 

The idea of a common BRICS currency has generated enormous political attention, particularly after repeated comments by Trump attacking the bloc’s alleged plans to challenge the dollar.

But economists and policymakers have repeatedly pointed to the enormous difficulties involved. Pant is blunt.

“I think it’s too far. There are economies which are in very divergent positions. There are now 11 countries in Brics that are at very different stages of economic development. A common currency is a huge deal.” The comparison with the euro is instructive. The European Union required years of institutional negotiations, fiscal coordination, monetary convergence and political compromise before the euro could become a functioning common currency. BRICS has none of the same level of economic convergence.

Its members have vastly different inflation rates, interest-rate regimes, capital-account restrictions, fiscal positions and monetary priorities.

A common currency would therefore require an extraordinary level of political and economic integration — precisely the kind of integration that BRICS has so far avoided. “I don’t think, under the present circumstances, this is something that’s on anyone’s agenda,” Pant says.

Diversification is the BRICS compromise 

This is where the concept of diversification becomes much more useful. “Brics talking about de-dollarisation as a platform would mean that there is consensus across the 11-member countries that they want to move away from the dollar,” Pant says.

“But I don’t think that’s the case. There are several countries within Brics that are still comfortable within the dollar framework. They have neither the desire nor the inclination to move away from the dollar.”

That is the fundamental problem with turning de-dollarisation into a formal BRICS doctrine. The grouping is too diverse. Its members have different economic structures, different external vulnerabilities and different relationships with the United States and China. What they can potentially agree on is something narrower.

“What they certainly would want is to diversify their economic relationships to an extent where they can have local currency transactions bilaterally, as India and Russia are doing with rupee-ruble exchanges, or India with some other country engaging in similar transactions.”

“I think that is much more workable. You are not talking about replacing the dollar. You are talking about diversifying away from the dollar to an extent that the dollar is not the only currency in which you are transacting.” That may ultimately be BRICS’ most realistic financial ambition.

The NDB: BRICS’ tangible alternative

The move towards local currencies is not confined to trade. The New Development Bank, the BRICS-led multilateral development bank, is also gradually increasing the role of local currencies in its financing.

Papa notes that the bank’s earlier strategy envisaged around 30 per cent of financing in local currencies, while its 2027-31 strategy raises that ambition to 40-50 per cent. “The new strategy for 2027-31 says that now it wants 40-50 per cent of local-currency financing. So you do see this shift.”

That is a more concrete form of diversification than talk of a BRICS currency. It also fits the broader purpose of the NDB: financing infrastructure and development projects without necessarily routing every transaction through the traditional dollar-based financial system.

The significance should not be exaggerated; however, even a much larger share of local-currency lending would not by itself challenge the dollar’s central role in global finance. As Papa puts it: “I see more movement towards diversification, but at the same time, dollar dominance is very strong and is likely to remain so in the near future.”

The China challenge inside BRICS 

There is an irony running through the entire BRICS debate. The more successful the bloc becomes in reducing its dependence on the dollar, the greater the potential role of China could become.

China is by far the largest economy in the expanded grouping and has the most internationally used currency among BRICS members. That creates a structural imbalance.

Papa says that if the other BRICS countries were equally comfortable with the yuan, the bloc would have little reason to debate alternative payment architectures or a common currency. “Why not just have the whole of Brics accept the yuan? But there is no consensus, and there are concerns about the barriers and about China’s role.”

“If we look at the percentage of China’s GDP versus the percentage of others in Brics, Brics looks like a China hub, and then there are the rest of the countries.”

“I believe there is a lot of sensitivity around that. That is why progress here has been quite slow.” For India, this is arguably the most important strategic constraint. New Delhi wants greater financial autonomy, but not at the cost of becoming more dependent on Beijing.

What BRICS may actually achieve

The most realistic outcome from the BRICS financial agenda is therefore unlikely to be a dramatic monetary rupture. It is more likely to be a gradual construction of alternatives. More bilateral local-currency trade. Greater use of national currencies in development financing. Interoperable digital payment systems. More cross-border payment options. Potentially greater use of currencies such as the yuan and rupee in regional and bilateral transactions.

And, perhaps most importantly, a financial system in which countries have more choices. Papa describes the current situation as one worth watching, but not yet a breathtaking transformation.

“There is a dollar-dominance monitor that is not changing much. So this is really an area to watch, but it is not breathtaking at the moment.” There is another reason why progress will remain complicated.

“China wants to internationalise the yuan. India wants to internationalise the rupee. So the full incentives to work through Brics are not necessarily there.”

That may be the central contradiction of BRICS’ monetary ambitions. The bloc wants alternatives, but its largest members also want their own currencies to gain international influence.