Brics currencies are no realistic alternative to the US dollar
The benign attitude of the US authorities towards the rest of the world using the currency as the sole international money has made this possible. This system has its advantages but also many well-known drawbacks, including control by one government and the need to convert twice, into the vehicle currency and out again, creating costs and risks. Emerging economies have become more assertive in recent years, while the US apparently has reneged on its role as provider of such global currency. The outcome is the discussion about de-dollarisation, driven by academics as well as politicians, while financial markets sit on the fence waiting for a viable alternative to the US dollar.
The state of de-dollarisation
Presently, the US dollar is used for global denomination, enacting cross-border transactions for current as well as financial accounts. The currency is used as a store of value for small individual investors as well as larger investors looking for safe havens. The denomination function is used for convenience of comparability.
This can easily be replaced by artificial intelligence, which could convert national currencies into a weighted unit, such as a basket of currencies from countries including Brazil, Russia, India, China and South Africa.
The use of multiple national currencies to settle cross-border payments is beginning to happen in the Brics bloc. The renminbi is reportedly already used in 50 per cent of intra-Brics trade, whereas it made up only 2 per cent of global payments in May 2025, according to Swift. The Brics cross-border payments system is still under discussion.
The major issue is the settlement of imbalances, as no mechanism has been devised and no vehicle currency has been mandated. The previous Brics Pay initiative turned out to be a hoax and the present suggestion of XRP is a cryptocurrency, abhorred by countries like China.
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China on its own is neither willing nor ready to play the role of a Brics vehicle currency. A clearing institution like the European Payments Union after World War II is called for.
However, this mechanism would circumvent the need for the US dollar in only a small share of cross-border transactions – the trade in goods and services, which totalled some US$33 trillion in 2024, about one-third of global gross domestic product. The lion's share of cross-border financial transactions is still conducted in major currencies, such as the US dollar.
Greenback still dominates foreign exchange
According to the Bank for International Settlements' (BIS) latest triennial survey, the global foreign exchange market is worth US$7.5 trillion a day, matching a year's trade in goods and services in only five days. This is made up of spot, futures and swaps, where the US dollar was still counterpart in 88 per cent of all transactions in 2022.
In comparison, the renminbi made up 7 per cent, well below its share in the special drawing rights basket of close to 12 per cent. The next BIS triennial survey was conducted in April 2025, with results to be published later in the year.
Other global financial markets, such as interbank and money markets, stock and bond markets plus derivatives markets, show a similar story.
The major players trading in these markets are also the ones looking for store of value, hedging positions in the short as well as long term. These are the global banks, corporations and investors. There has been little evidence of them abandoning major currencies in favour of Brics national currencies, which are at the whim of political leaders.
As the US administration is neglecting its responsibility for providing a global currency, the search is on for alternatives. Brics currencies have been mentioned, but a common Brics currency backed by gold was off the agenda at the July Brics summit in Rio de Janeiro. This leaves the national currencies, ranging from the renminbi to the Ethiopian birr.
As Official Monetary and Financial Institutions Forum contributors Gary Smith and Udaibir Das have argued, a new Brics financial governance is highly unlikely. In the absence of such a political agreement, a trustworthy vehicle currency might emerge for settlement of Brics trades that is a far cry from replacing the US dollar. OMFIF
The writer is a senior research fellow at Zhejiang University
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