The BRICS nations’ ambition to establish a viable alternative to the U.S. dollar for international trade, often referred to as the “de-dollarization” agenda, faces formidable hurdles despite high-level support from member states. Leaders, including Russia’s Vladimir Putin and China’s Xi Jinping, have signaled their desire to create a payment system independent of the dollar. But experts warn that the road to a functional alternative remains fraught with technical and political challenges.
At the recent BRICS summit, discussions centered on establishing an alternative to SWIFT, the dominant international payment network from which Russia was excluded following its 2022 invasion of Ukraine. Putin highlighted the need for a secure framework that would allow BRICS countries—Brazil, Russia, India, China, and South Africa—to conduct trade in their national currencies. Yet, independent analysts remain skeptical about the feasibility of such a system emerging in the near future.
Eva Seiwert, an analyst at the Mercator Institute for China Studies, observed that the Kazan Declaration, which encapsulated the summit’s outcomes, remained noncommittal. The declaration mentioned the BRICS Cross-Border Payments Initiative (BCBPI), a system intended to foster currency settlements within the group, but made clear that participation would be “voluntary and non-binding.” The absence of binding commitments has raised questions about the group’s political will and readiness to pursue a full-fledged alternative payment network.
One of the most significant technical obstacles to de-dollarization is the issue of currency fluctuations. Gopal Tripathy, head of Treasury at Jana Small Finance Bank in Bengaluru, noted that any alternative payment system would need a mechanism for managing exchange rate volatility. If BRICS were to use the dollar as a reference currency, it would compromise the entire purpose of distancing itself from dollar reliance, Tripathy argued. Furthermore, even if BRICS members adopt such a system, companies outside the bloc could struggle with transaction difficulties, as most global businesses remain deeply intertwined with dollar-based financial systems.
Moreover, while India and China have successfully conducted trade with Russia using local currencies, expanding this model to other BRICS members would require a more robust and interoperable infrastructure. Without a reliable and resilient financial framework, there is little assurance that BRICS members can replicate such arrangements consistently or at scale, especially in sectors where cross-border transactions are essential.
The BRICS plan has not gone unnoticed in Washington. U.S. Treasury Secretary Janet Yellen warned that continued economic sanctions could drive BRICS and other nations toward non-dollar financial networks, potentially accelerating de-dollarization efforts. In her testimony before the House Financial Services Committee in July, Yellen noted that an increased reliance on sanctions might push more countries to seek alternative transaction methods. Yet, she tempered her concerns by pointing out the unique strengths of the U.S. financial system, including its deep liquidity, strong legal framework, and capital market freedoms—advantages that BRICS would struggle to replicate.
Beyond sanctions, other geopolitical tensions also feed into BRICS’ desire to decrease dependency on the dollar. The growing rift between the U.S. and both China and Russia has incentivized these nations to fortify their economic alliances and explore pathways to more autonomous financial systems. However, consensus on de-dollarization within BRICS remains elusive, as evidenced by differing stances on a shared BRICS currency.
Brazil has proposed issuing a unified BRICS currency, an idea that underscores the group’s ambition for greater financial independence. However, this proposal has not gained traction among the other members, who are wary of the economic compromises it would entail. The New York-based Council on Foreign Relations highlighted the complexities, pointing out that a shared currency would necessitate a banking union, a fiscal union, and substantial macroeconomic convergence—requirements that would be exceedingly difficult to achieve across such a diverse group.
Many economists doubt whether a BRICS currency could ever gain the stability and global trust needed for widespread adoption. For one, the economic policies of BRICS nations are often divergent, reflecting the unique priorities of each member state. In addition, the economic stability of BRICS members varies widely; while China and India are growing economic powerhouses, South Africa faces significant financial and structural challenges. These disparities would likely impede efforts to establish a stable and widely trusted BRICS currency, at least in the short term.
While the BRICS countries are making strides toward de-dollarization, the journey remains daunting. Analysts argue that despite BRICS’ shared goals, the lack of technical infrastructure, internal economic cohesion, and a robust governance framework make it unlikely that the group will soon develop a viable alternative to SWIFT or the dollar. Instead, the BRICS bloc may prioritize incremental measures, such as increased bilateral trade in local currencies, to gradually reduce dollar dependency.
For now, the dollar remains entrenched as the world’s reserve currency, supported by its widespread acceptance, the stability of U.S. institutions, and an extensive financial network that provides liquidity and security unparalleled by other currencies. Until BRICS can construct an integrated financial ecosystem with similar strengths, its de-dollarization agenda is likely to remain aspirational.
