Story of Dedollarization: How US vs BRICS Playing out?
Overview
For decades, the U.S. dollar has ruled global finance, reserves, and international debt. Now, a quiet revolution is gaining speed “de-dollarization”. BRICS nations, led by Brazil, Russia, India, China, and South Africa, are exploring alternatives to reduce reliance on the greenback. From local currency settlements to discussions of a shared reserve currency, this shift challenges decades of American monetary dominance.
In the Experts opinnion it won’t happen overnight. Liquidity, and institutional depth are some points that still favor the dollar. Yet, as geopolitics and economics collide, the contest between the US and BRICS could redefine the future of dollar as an global financial power.
BRICS: An Emerging Counterweight
The rise of BRICS is not just symbolic; it reflects a deliberate evolution of an economic bloc seeking greater autonomy in a dollar-dominated world. Over the past two decades, Brazil, Russia, India, China, and South Africa have deepened trade ties, expanded investment flows, and increasingly coordinated on financial policy.
The key motivation behind BRICS’ push for financial independence lies in reducing exposure to U.S. monetary policy, sanctions, and currency volatility. By strengthening local currency trade, building alternative payment systems, and debating a shared reserve asset, BRICS aims to position itself as a credible counterweight to Western financial hegemony.
BRICS+ Share of Global Reserves Over Time
Over the past decade, BRICS+ nations have steadily reshaped global reserves. Their foreign exchange holdings remain dominant, while gold reserves have surged, reflecting a strategic shift in reserve composition, driving diversification and signaling growing influence in the global de-dollarization and financial power balance.
The upward trend in BRICS+ gold reserves highlights a gradual pivot from traditional dollar reliance. While foreign exchange shares remain steady, gold’s rising role underscores strategic resilience, shaping future global reserve dynamics and positioning BRICS+ as a stronger player in international monetary transformation.
Why de-dollarization is happening and creating global buzz
Several pragmatic drivers explain why BRICS countries and partner states are actively chipping away at dollar reliance:
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Sanctions and “weaponisation” : Since 2022, the use of financial restrictions against Russia made many capitals acutely aware of the risks of running core payments and reserves through dollar-centric systems. That risk pushed Russia, and partner states, to accelerate non-dollar corridors and to diversify reserve composition (including gold). The threat of asset freezes incentivises local-currency settlement and alternate rails.
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Scale and geopolitical ambition : BRICS is expanding and working together to turn its growing economic power into stronger financial infrastructure. This includes cross-border payment projects and commitments from the New Development Bank (NDB) to fund development in local currencies. These are politically high value moves. They reduce reliance on western finance for trade and investment and give the Global South more autonomy.
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Technology and payment rails: China’s Cross-Border Interbank Payment System (CIPS) has surged in volume (RMB175.49tn in 2024) and connectivity. While BRICS have schemed BRICS-Pay and similar messaging/settlement solutions to bypass SWIFT dependence for intra-bloc flows. But technical reach, correspondent networks and trust remain uneven.
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Local currency internationalisation campaigns: India, Brazil, and other nations are working to expand rupee and real payment corridors through central-bank agreements. They are also allowing overseas lending in local currencies. These gradual institutional changes build influence steadily over the years.
These strategic, political, and technological shifts are not happening in a vacuum. Their cumulative effect is visible in the global reserve landscape. Over the past two decades, the U.S. dollar’s share in international reserves has gradually eroded as central banks diversify holdings into gold and other currencies, which is a trend accelerated by BRICS+ initiatives.
Decline of USD Share in Global Reserves
The data shows that over the last 10 years, the U.S. dollar’s share of global central bank reserves has steadily declined, dropping from 65.7% in 2015 to 57.7% in 2025. Despite minor fluctuations, this trend highlights a gradual shift away from the dollar, underscoring the measurable impact of global de-dollarization efforts.
How Political Tensions Fueling De-dollarization
Political dynamics underscore this financial reshuffling. These include:
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Diminishing trust in the dollar : Economists like Jeffrey Sachs and Joseph Stiglitz warn that the dollar’s “exorbitant privilege” may be unsustainable.
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The push for regional monetary stability : Several African countries are seeking alternatives to colonial-era currencies in favor of local systems.
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Central bank fragmentation : There are renewed proposals for pooling dollar reserves or expanding regional swap lines to reduce dependence on Federal Reserve facilities.
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The euro’s gradual strengthening : The euro still holds steady at around 20 percent of global FX reserves. Between May and June 2025, it attracted €186 billion in bonds and €46 billion in equities, signaling growing European interest.
Why the U.S. cannot afford to lose its dollar’s global dominance?
The U.S. cannot afford to lose the dollar’s global dominance due to its strategic “exorbitant privilege,” monetary strength, and geopolitical leverage. Here are the key points outlining what could happen if the U.S. loses its dollar dominance.
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Lower borrowing costs & high liquidity : Dollar reserve status lets the U.S. issue debt cheaply. It lowers interest rates by about 10–30 bps, which boosts fiscal flexibility and enables high debt levels to remain sustainable.
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Global trade & reserve currency : The dollar dominates trade invoicing (~50%–80%) and central banks’ reserves (~60%), anchoring global financial stability.
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Sanctions & geopolitical influence : Dollar dominance empowers the U.S. to enforce financial sanctions globally, shaping geopolitical outcomes.
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Systemic risk : Losing this status would raise borrowing costs, undermine investor confidence, weaken economic control, and destabilize global markets.
How will De-dollarization affect US economy, if happen?
De-dollarization threatens dollar dominance and its reserve currency status, reducing demand for Treasury bonds and raising U.S. borrowing costs. That pushes interest rates upward and risks stoking inflation, while diminishing America’s “exorbitant privilege” to run large deficits affordably. The dollar’s fall could weaken U.S. economic influence and geopolitical leverage, forcing cuts in strategic spending and policy flexibility.
What was our take on the de-dollarization debate?
De-dollarization reflects a world in transition. The steady rise of BRICS, regional payment systems, and gold-backed reserves shows a collective effort to reduce dependence on any single currency. The U.S. dollar remains dominant due to its liquidity, and institutional depth, but it no longer enjoys an uncontested position.
Instead, we are moving toward a multipolar monetary order, where multiple strong currencies share influence. This shift brings opportunities for resilience and balanced growth, yet it also introduces new risks, including fragmentation, volatility, and shifting alliances that redefine how nations trade, borrow, and exercise geopolitical power in the years ahead.
Web Resources on Dollar Dominance to De-dollarization
1. Imf.org: World Currency Composition of Official Foreign Exchange Reserves
2. Imf.org: Currency Composition of Official Foreign Exchange Reserves
3. Brics.br: BRICS Bank Welcomes new members
4. Federalreserve.gov: International Role of the U.S. Dollar
5. Yalejournal.org: Trump’s Presidency and the Dollar’s Reserve Status
Final Words
The global shift from dollar dominance to de-dollarization signals a profound transformation in international finance. As BRICS nations expand monetary autonomy and diversify reserves, the U.S. dollar remains a pillar of trust and liquidity. Yet, a multipolar currency landscape is emerging, reshaping trade, investment, and geopolitical power with both opportunities and risks for the global economy. Please share your thoughts below in the comment section and help us to make this article better. Thank you for reading!
Questions and answers related to De-dollarization:
De-dollarization is the strategic reduction of reliance on the US dollar in trade, reserves, and finance. Driven by sanctions, geopolitical friction, and monetary sovereignty aspirations, countries increasingly settle trade in local currencies, diversify reserves into gold and alternatives, and develop independent payment systems to mitigate exposure to US-controlled financial infrastructure. National currency usage grows with shifting global power dynamics.
Countries notably reducing dollar dependency include China, Russia, India, Iran, Brazil, and various CIS and African states. They increasingly settle bilateral trade in currencies like yuan, rupee, ruble, euro, and even barter or gold. While not fully abandoning the dollar, these partial shifts signal a deliberate diversification away from dollar-led systems and toward regional alternatives.
De-dollarization undermines the dollar’s dominance gradually by reducing demand through alternative currencies, gold, and new payment systems. Transition is slow; entrenched infrastructure and investor trust maintain the dollar’s key role, even as its reserve share dips toward ~58%.
The BRICS bloc is exploring a common digital settlement mechanism via BRICS Pay, enhancing trade in local currencies and reducing reliance on SWIFT or the dollar. However, a unified BRICS currency remains speculative. For individuals, this may translate into new investment vehicles, lower remittance costs, and preferential trade pricing—though practical rollout and global impact remain years away.
The US relies on dollar dominance to borrow affordably, finance deficits, and enforce sanctions. A loss of reserve status risks higher borrowing costs, fiscal instability, and weaker geopolitical influence. It would destabilize global markets and constrain US monetary flexibility. Politically, diminished dollar power would erode America’s leverage over global finance and foreign policy.
BRICS countries seek a new currency or settlement mechanism to enhance monetary autonomy, lower dependency on the dollar, reduce transaction costs, and shield themselves from financial sanctions. They aim to promote intra-bloc trade using local currencies and strengthen influence in global finance by building alternatives to dollar-centric infrastructure.
De-dollarization could gradually reduce global demand for the US dollar, weakening its value and pressuring inflation upward in the United States. This shift may erode America’s ‘exorbitant privilege’, its ability to borrow cheaply, and diminish fiscal flexibility. However, these changes are likely incremental, as the dollar still dominates global trade and reserves.
Donald Trump has vocally opposed BRICS forming a new reserve currency, threatening severe tariffs, including a 100% tariff on any nation that backs such efforts. He labels the move ‘anti-American’ and asserts that any such challenge to the dollar would be met with swift economic retaliation.
De-dollarization yields mixed outcomes: for emerging economies, reducing dependence on the dollar can lower transaction costs, boost economic sovereignty, and mitigate sanction risks. Yet for global financial stability, rapid shifts may fragment markets, reduce liquidity, and weaken sanctions efficacy. Overall, its impact depends on the pace and institutional frameworks accompanying the transition.
While headlines highlight de-dollarization, the dollar remains dominant with around 90% of global trade still denominated in dollars. The shift is more gradual realignment than collapse. Analysts remain skeptical that the dollar’s deep entrenchment will be swiftly displaced; institutional inertia and infrastructure reinforce its resilience.
BRICS countries are building alternatives like BRICS Pay and bilateral currency settlements to challenge dollar primacy. These initiatives strengthen regional financial autonomy, yet institutional limitations, liquidity constraints, and political divergence hinder rapid displacement. A full Trump-era break appears unlikely in the near term.
De-dollarization influences global finance by reshaping trade patterns, weakening the dollar’s reserve role, and empowering regional financial architectures. It may elevate borrowing costs for the US, enhance monetary autonomy for others, and drive fragmentation in payment systems and monetary governance. The transition remains incremental yet strategically significant.