BRICS De-dollarisation: Why It Remains an Aspiration Rather Than an Alternative to Dollar Dominance

BRICS de-dollarisation refers to the broader effort to reduce dependence on the US dollar in international trade, cross-border payments, foreign-exchange reserves and development finance. For BRICS, it is part of the broader objective of increasing strategic autonomy and creating a more multipolar international financial system. However, despite growing efforts to promote local-currency settlements, BRICS has not yet created a credible substitute for the dollar-based system.

Introduction

De-dollarisation refers to reducing dependence on the US dollar in international trade, cross-border payments, foreign-exchange reserves and development finance. For BRICS, it is part of the broader objective of increasing strategic autonomy and creating a more multipolar international financial system. However, despite growing efforts to promote local-currency settlements, BRICS has not yet created a credible substitute for the dollar-based system.

1. BRICS and de-dollarisation

The demand for greater monetary autonomy arises from several concerns.

• Dollar dominance creates strategic dependence. The US dollar remains central to global reserves, trade finance and international payments. The IMF's latest COFER data available for 2024 Q4 put the dollar's share of allocated global foreign-exchange reserves at 57.8%, compared with just 2.18% for the Chinese renminbi.
• Financial sanctions have highlighted geopolitical vulnerabilities. The freezing of Russian financial assets and restrictions on access to Western financial infrastructure have strengthened arguments within BRICS for developing alternative payment mechanisms.
• BRICS seeks greater Global South autonomy. Local-currency trade can reduce exchange-rate risks, transaction costs and dependence on external financial intermediaries.

2. Evidence of movement towards de-dollarisation

a. Greater use of local currencies

• BRICS has promoted settlement of trade and financial transactions in members' national currencies rather than automatically routing transactions through the dollar.
• The objective, however, is increasingly framed as diversification rather than abandoning the dollar. India, for instance, has consistently maintained that BRICS should focus on practical economic cooperation rather than creating a common currency.

b. New Development Bank

• The New Development Bank (NDB) represents one of the most concrete BRICS initiatives towards financial diversification. Local currency lending, which the bank’s leadership set as a target of 30% of its portfolio by the end of this year, sat at roughly 22% as of mid-2025.
• The NDB has expanded local-currency financing and issued bonds in member currencies. In January 2025, it issued a RMB 6 billion five-year Panda Bond, taking its cumulative Panda bond issuance to RMB 61.5 billion.
• At the same time, the NDB continues to use hard currencies. In March 2025, it issued a US$1.25 billion benchmark bond, demonstrating that even BRICS' flagship financial institution remains integrated with dollar-based capital markets.
• Thus, the NDB is helping diversify the financial system, but not replacing the dollar.

c. Alternative payment mechanisms

• BRICS has discussed strengthening cross-border payment cooperation and interoperability among national payment systems. Such mechanisms could gradually reduce dependence on Western-controlled financial infrastructure.

3. Why de-dollarisation remains an aspiration

1. The dollar's network advantage

• The dollar's dominance is not based merely on US political power. It is supported by deep and liquid financial markets, widespread acceptability, established payment networks, safe assets and extensive use in trade invoicing. Therefore, replacing the dollar requires much more than an agreement among BRICS governments.

2. Absence of a common BRICS currency

• A common BRICS currency has attracted considerable media attention, but there is no consensus for such a project.
• Members have different economic structures, monetary policies, exchange-rate regimes and strategic interests. India has been particularly cautious about the idea of a common BRICS currency.
• Hence, local-currency settlement is considerably more feasible than a common BRICS currency.

3. Internal economic asymmetry

• BRICS members do not possess currencies with comparable international acceptance.
• China has a much larger financial and trading footprint than most other members, making increased use of the renminbi a possible alternative to the dollar. But this could also create dependence on another major power rather than genuine monetary pluralism.

4. Limited convertibility and liquidity

• For internationalisation, a currency needs deep capital markets, convertibility, predictable monetary policy and sufficient liquidity.
• Many BRICS currencies do not yet possess these characteristics at the scale required for global reserve and settlement functions.

5. Continued dependence on the existing financial architecture

• The NDB itself illustrates this contradiction. While it promotes local-currency financing, it continues to raise funds in major international currencies, particularly the US dollar, through global capital markets. For instance, NDB issued a US$2 billion benchmark bond in February 2026, even as it simultaneously expanded renminbi and other local-currency financing.
• NDB's reliance on S&P, Moody's and Fitch illustrates that BRICS institutions still operate according to globally dominant financial standards. The 2022 suspension of Russia-related transactions further demonstrated the constraints created by these market and credit considerations.
• Thus, BRICS institutions are not outside the existing financial architecture; rather, they are attempting to diversify and reform it from within.

6. Divergent national interests

• BRICS is not a unified economic bloc. India, China, Russia, Brazil, Gulf countries and other members have different relationships with the US and different levels of dependence on the dollar.
• Consequently, geopolitical convergence does not automatically translate into monetary convergence.

4. Why the shift should nevertheless not be dismissed

• The dollar's share of global reserves has gradually declined over the long term, while non-traditional reserve currencies have gained some ground. The IMF itself describes this as a gradual evolution rather than a sudden collapse of dollar dominance.
• Similarly, the NDB's expansion of local-currency financing, BRICS discussions on payment interoperability and diversification of funding sources represent incremental institutional change. The 2025 BRICS agenda explicitly supported the NDB's efforts to expand local-currency financing.
• Therefore, the more realistic trajectory is de-dollarisation at the margins and diversification of the international monetary system, rather than an abrupt replacement of the dollar.

Way Forward

1. Strengthening local-currency settlement mechanisms for intra-BRICS trade.
2. Developing interoperable payment systems without creating unnecessary parallel institutions.
3. Deepening local-currency bond markets to provide credible alternatives to dollar financing.
4. Expanding NDB lending in local currencies while maintaining financial sustainability.
5. Promoting currency-swap arrangements among central banks.
6. Improving convertibility, liquidity and financial-market depth of BRICS currencies.
7. Avoiding premature attempts at a common BRICS currency, given divergent economic structures.
8. Maintaining an inclusive approach where de-dollarisation means diversification rather than an explicitly anti-US financial bloc.

Conclusion

BRICS has started the process of reducing excessive dependence on the dollar but has not created a viable alternative to dollar dominance. Its most realistic contribution is therefore not to replace the dollar overnight, but to gradually build a more diversified, multipolar and resilient international monetary system.

For India, this approach is particularly compatible with its policy of strategic autonomy, expanding the range of financial and geopolitical choices without unnecessarily severing ties with the existing global financial architecture.