Why de-dollarization discussions are more talk, less action

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When BRICS leaders met over the weekend, they talked about the economic power of the Global South and the need to expand trade in local currencies, signaling a push to cut dependence on the greenback.

The bloc aims to reduce its reliance on the greenback due to geopolitical tensions, economic sanctions, and the U.S. tariff policy, experts said. However, they raised doubts about the ability of the BRICS to wean away from the dollar.

For years, the term "de-dollarization" has come up from time to time, especially when confidence in the U.S. is shaken.

The idea is simple: Countries mostly transact in the U.S. dollar today, thereby underpinning most of the world's financial systems. For example, two of the world's most traded commodities, oil and gold, are denominated in the greenback.

Data from the Bank of International Settlements reveals that the U.S. dollar made up 89% of the forex market — up 1 percentage point from a year earlier — while the euro and the yen made up 29% and 17%, respectively, as of April.

South African President Cyril Ramaphosa said in his address at the BRICS Summit that BRICS should "press ahead with greater use of local currencies, stronger cross-border payment systems and deeper financial interconnectivity."

Energy-rich economies such as Iran and Russia, two members of the BRICS, whose ability to trade in dollars has been hampered due to U.S. sanctions, also urged the bloc to develop payment, settlement and depository infrastructure within BRICS.

The current financial system is "vulnerable to political shocks due to its concentration on a limited number of currencies," Iranian President Masoud Pezeshkian said, hinting at the need to diversify away from the dollar.

Yet lack of financial and macroeconomic integration, wide trade imbalances and deep distrust between key member states, such as China and India, are the biggest hurdles the BRICS need to cross before it breaks free from the hegemony of the dollar, experts said.

The BRICS lack the unified institutional, financial, and macroeconomic infrastructure needed to substitute the "inherent liquidity and trust" of the dollar globally, Jayant Krishna, senior fellow at the Center for Strategic and International Studies, told CNBC.

Baby steps

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

"We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. dollar, or they will face 100% Tariffs and should expect to say goodbye to selling into the wonderful U.S. Economy," Trump wrote.

Collectively, 10 BRICS member countries accounted for 27% of world output, 24% of merchandise exports, and 22% of foreign direct investment inflows in 2024, a United Nations Trade and Development report said in March.

"This brings fresh opportunities, avenues for cooperation and vast potential," the report said but underscored that at present the scale of intra-BRICS trade only accounted for about 5% of world trade as of 2024.

While member countries have spoken of expanding trade in national currencies, few concrete steps have been seen in that direction. The BRICS 2026 declaration had no mention of common currency or firmer details on trade settlements and investments using BRICS local currencies. Instead, the BRICS Payment Task Force was asked to work on facilitating "practical solutions for cross-border payments."

"Russia and China now settle close to ninety percent of their trade in rubles and yuan," but that shift has been accelerated by U.S. sanctions after 2022 rather than coordinated BRICS policy, Reema Bhattacharya, head of Asia research at Verisk Maplecroft, told CNBC

Most BRICS currencies lack deep liquid markets outside their home economies, which discourages exporters from accepting them and keeps dollar invoicing the path of least resistance for global commodities, she explained.

Experts said that competing interests among BRICS nations also make de-dollarization difficult.

China-India competition

"India-China rivalry, which I'd call the single biggest brake on cohesion across the bloc," Bhattacharya said.

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

This tension, in addition to a widening trade imbalance between the two major BRICS countries, makes the trust needed for deeper financial integration hard to sustain.

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 has also risen to a record $112.16 billion, up from $99.21 billion.

Meanwhile, India's goods and services trade with the U.S. was around $239 billion in 2025, with a goods trade surplus of $58.4 billion and a services trade surplus of $4.7 billion. So, a shift away from the dollar does not work in India's favor, as it has a large trade deficit with China and other countries.

"BRICS members also have vastly different priorities," Krishna Bhimavarapu, APAC Economist, State Street Investment Management, told CNBC.

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

"Ultimately, no BRICS-led alternative currently matches the liquidity and market depth, credibility and global acceptance of the Dollar," he added.