Is the de-dollarization discussion more talk, less action

When BRICS leaders met over the weekend, they spoke of the economic strength of the Global South and the need to expand local currency trade, signaling a push to reduce dependence on the greenback.

The bloc aims to reduce dependence on the greenback due to geopolitical tensions, economic sanctions, and US tariff policies, experts say. However, they cast doubt on the ability of BRICS to eliminate the dollar.

For years, the term “de-dollarization” has come up from time to time, especially when confidence in the US is shaken.

The idea is simple: Most countries transact in US dollars today, thus supporting most of the world’s financial system. For example, the two most traded commodities in the world, oil and gold, are traded in greenbacks.

Data from the Bank of International Settlements show that the US dollar makes up 89% of the forex market – up 1 percentage point from the previous year – while the euro and yen make up 29% and 17%, respectively, in April.

South African President Cyril Ramaphosa said in a speech at the BRICS summit that the BRICS must “continue to move forward with greater use of local currencies, stronger cross-border payment systems and deeper financial interconnectivity.”

Energy-rich economies such as Iran and Russia, two BRICS members, whose ability to trade dollars has been hampered by US sanctions, have also called on the bloc to develop payment, settlement and deposit infrastructure in BRICS.

The current financial system is “vulnerable to political shocks because it is concentrated in a limited number of currencies,” Iranian President Masoud Pezeshkian said, signaling the need to diversify away from the dollar.

However, the lack of financial and macroeconomic integration, trade imbalances and deep mistrust among key member states, such as China and India, are the biggest obstacles BRICS must overcome before shedding the hegemony of the dollar, experts say.

The BRICS lack the institutional, financial, and macroeconomic infrastructure needed to replace the dollar’s “liquidity and confidence” globally, Jayant Krishna, a senior fellow at the Center for Strategic and International Studies, told CNBC.

The most common mention of de-dollarization is usually among the BRICS countries. US President Donald Trump has in the past threatened the bloc with tariffs if it moves away from the dollar.

“We need a commitment from these countries that they will not create a new BRICS Currency, or create another currency to replace the strong US dollar, or they will face 100% Tariffs and have to say goodbye to selling to the good US Economy,” wrote Trump.

Collectively, the 10 BRICS member countries will account for 27% of world output, 24% of merchandise exports, and 22% of foreign direct investment flows by 2024, the United Nations Trade and Development Report in March reported.

“This brings new opportunities, avenues for cooperation and a lot of potential,” the report said, but emphasized that the current scale of intra-BRICS trade is only about 5% of world trade in 2024.

While member states have been talking about developing trade in national currencies, some concrete steps have been seen in that direction. The BRICS 2026 declaration does not mention a common currency or stronger details on trade and investment settlements using local BRICS currencies. Instead, the BRICS Payments Task Force was asked to facilitate “practical solutions for cross-border payments.”

“Russia and China are now close to ninety percent of their trade in rubles and yuan,” but the change has been accelerated by US sanctions after 2022 rather than a coordinated BRICS policy, Reema Bhattacharya, head of Asia research at Verisk Maplecroft, told CNBC

Most BRICS currencies do not have deep liquid markets outside their home economies, which prevents exporters from accepting the bills and makes dollar bills the least durable route for global commodities, he explained.

Experts say competing interests among the BRICS countries also make de-dollarization difficult.

“The India-China rivalry, which I call the biggest brake on cohesion in the bloc,” Bhattacharya said.

Beijing and New Delhi want greater strategic autonomy from Washington, but remain direct competitors in manufacturing, technology, investment and regional influence.

These tensions, in addition to the growing trade imbalance between the two main BRICS countries, make the trust necessary for deeper financial integration difficult to achieve.

China is one of India’s largest business partners, with total trade at a record $151.1 billion in the year ending March 2026. But New Delhi’s deficit with Beijing also increased to $112.16 billion, from $99.21 billion.

Meanwhile, India’s goods and services trade with the US will be $239 billion by 2025, with a goods trade surplus of $58.4 billion and a services trade surplus of $4.7 billion. So, the change from the dollar is not possible for India, because of the large trade deficit with China and other countries.

“BRICS members also have very different priorities,” Krishna Bhimavarapu, APAC Economist, Country Road Investment Management, told CNBC.

Russia and Iran want to reduce exposure to the dollar due to the risk of sanctions; China wants more international use of the renminbi but maintains capital controls; India, meanwhile, supports the use of more than the rupee, he said.

“Ultimately, there is no BRICS-led alternative that matches the liquidity and market depth, credibility and global acceptance of the Dollar,” he said.