Understanding de-dollarisation in context - with or without BRICS

The truth is this: not all BRICS members, let alone their partner countries, are pushing for the same thing when they speak of “de-dollarisation.” Indeed, some are not pushing for it at all.

At first glance, the rise of BRICS appears to be in direct opposition to the dominance of the US dollar. BRICS nations have frequently voiced frustrations about the dollar-centric global order, especially in the context of sanctions, currency volatility, and the perceived inequity of international financial institutions like the International Monetary Fund (IMF) and World Bank, which are seen to reflect U.S. geopolitical interests.

However, lumping all BRICS countries under one banner of de-dollarisation misses a critical truth: there is no monolithic consensus within the bloc.

Take India, for instance. Despite being a core BRICS member and a leading advocate for multipolarity in global governance, India is quietly resistant to full-scale de-dollarisation. New Delhi has strategic reasons to maintain the dollar’s role in its international transactions.

Its substantial trade with the United States, dollar-denominated debt, and exposure to international capital markets makes any abrupt move away from the dollar not only impractical but potentially economically harmful.

Moreover, India has refused to join initiatives like China's Cross-Border Interbank Payment System (CIPS) and has yet to embrace a BRICS-wide common currency. Instead, its focus is more aligned with pragmatism—using local currencies in bilateral trade when necessary but not pushing for global displacement of the dollar.

The core of de-dollarisation, especially as articulated in the recent BRICS+ summits, is not a crusade to destroy the dollar, but rather a quest for monetary sovereignty.

When countries like Brazil or South Africa talk about de-dollarisation, what they mean is the use of their own currencies—or mutually agreed local currencies—in bilateral or regional trade to reduce vulnerability to external shocks, including those induced by U.S. interest rate hikes or unilateral sanctions.

In fact, what is rarely mentioned is that de-dollarisation is often contextual and functional. It typically refers to two countries choosing to conduct trade in their local currencies—say, the Indian Rupee and the Russian Ruble, or the Chinese Yuan and the Brazilian Real—not to a grand strategy of dismantling the dollar-based system.

Malaysia, for example, has similarly emphasized its willingness to trade in local currencies “with some, not all” of its economic partners.

This does not amount to a wholesale rejection of the dollar. Rather, it is an attempt to develop parallel financial channels that increase flexibility without triggering geopolitical backlash.

Despite growing rhetoric about de-dollarisation, the greenback remains deeply entrenched in the global financial architecture.

According to the Bank of International Settlements, the U.S. dollar features in nearly 90 per cent of all foreign exchange transactions, and dominates 85 per cent of activity in spot, forward, and swap markets. More strikingly, 50 per cent of global trade and three-fourths of Asia-Pacific trade are invoiced in dollars.

Even when we turn to central bank reserves—the classic bellwether of confidence in a currency—the dollar remains dominant.

While its share of official reserves has dipped slightly from 61.5 per cent in 2012 to 58.4 per cent in 2022, this fall is marginal and mirrored by declines in other major currencies like the euro (which fell from 24.1 per cent to 20.5 per cent over the same period). The Chinese renminbi, despite years of internationalization efforts and Belt and Road financial diplomacy, still commands less than 3 per cent of global reserves.

In terms of global debt markets, the picture is even starker. Roughly 70 per cent of all foreign currency-denominated debt is still in U.S. dollars. This includes sovereign bonds, corporate bonds, and syndicated loans. The reasons are structural: the dollar offers liquidity, predictability, and access to deep capital markets that no other currency can currently rival.

Instead of interpreting de-dollarisation as a global revolt, it may be more accurate to see it as a complementary process that seeks diversification, not replacement. Nations are learning from financial disruptions like the U.S.-China trade war, the freezing of Russian foreign reserves post-Ukraine invasion, and the volatility triggered by U.S. interest rate hikes. In response, they are seeking to hedge against the dollar—by increasing gold reserves, trading in local currencies, and building alternative payment systems.

Yet, these steps do not negate the dollar’s centrality. Rather, they reflect a strategy of financial hedging, a kind of currency insurance for countries worried about overexposure to any one system.

For ASEAN countries, de-dollarisation has even more cautious undertones. ASEAN member states are deeply embedded in dollar-centric trade flows—especially given their dependency on exports of semiconductors, integrated circuits, and raw materials. Malaysia, for instance, conducts 64 per cent of its two-way trade in electronics, and most of that trade is dollar-denominated.

Nonetheless, countries like Malaysia and Indonesia have taken steps toward limited bilateral currency arrangements. For instance, Indonesia and Malaysia have agreed to trade in their local currencies for certain types of cross-border transactions. Thailand has joined similar mechanisms, forming a triangle of localized financial flexibility. Still, these arrangements coexist with robust dollar usage, not in opposition to it.

The world may be heading toward a more diversified currency landscape, but that does not mean the end of dollar dominance. The greenback’s institutional foundations—U.S. treasury markets, financial transparency, legal robustness, and global investor trust—remain without peer. Even China’s yuan, despite Beijing’s ambitions, is unlikely to dethrone the dollar in the absence of full capital account liberalization and political trust from international investors.

De-dollarisation, in its current form, should therefore be seen not as a dramatic shift but as an incremental recalibration of the global monetary system—one that emphasizes coexistence over confrontation, resilience over revolution.

Whether within BRICS or beyond it, the trend is not toward monetary divorce from the dollar, but toward partial diversification, aimed at building a more flexible, sovereign, and less risk-prone global trade infrastructure.

The global debate on de-dollarisation must move beyond binary thinking. It is neither the beginning of a financial insurrection nor the end of U.S. dominance. Rather, it is the maturation of a multipolar world where countries seek room to manoeuvre amid rising geopolitical and financial uncertainty.

As the old adage goes: “Don’t put all your eggs in one basket.” De-dollarization is merely a reflection of this timeless financial wisdom—not a call for regime changes in the world’s currency order.

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Phar Kim Beng is Director of the Institute of Internationalization and ASEAN Studies (IINTAS), Professor of ASEAN Studies in International Islamic University of Malaysia (IIUM) and a former Head Teaching Fellow at Harvard University.