By Mahnoor Akhtar

The whole idea of de-dollarization has been gradually promoted by the emerging economies mainly because they felt the Western financial institutions over the US dollar’s role in international trading very dominantly for a long time. The dollar has been the king of currencies in international finance for decades, giving the US a very strong say in the world’s financial matters. Nonetheless, the 2008 financial crisis plus the sanctions on Russia after its invasion of Ukraine in 2022 were the primary catalysts for several BRICS countries to step up their initiatives to cut off their dependence on the dollar, looking for more economic independence and less exposure to outside influences.

The US dollar has been a source of liquidity and a common medium for trade historically, but the case of many developing countries is that the dollar dominance has created a structural barrier for them. The power of the dollar leads to loss of monetary control over the domestic economy as the latter gets influenced by the foreign monetary policy: In the case of interest rate changes in the Federal Reserve, inflationary pressures and currency volatility might be the consequence in the other areas. Besides, international debt repayments in dollars become costlier when the local currency gets weaker, which has been a typical case seen often in the Global South. On top of all this, the economic disadvantages of dollarization result in the development of unequal power relations in global trade, keeping Western influence over the so-called periphery economies.

The United States is able to impose unilateral sanctions with broad economic consequences by the mere fact of the dollar being the main currency. Western sanctions after Russia’s attack on Ukraine in 2022 aimed at cutting the Russian economy off, which led to an acceleration of Moscow’s attempts to divert trade into “sanction-proof” routes. Thus, by the dawn of 2025 almost 90-95% of Russia’s trades with China and India were basically done in national currencies mostly yuan, ruble, and rupee rather than in U.S. dollars.

This shift, as seen in the historical data, is not only recent. The 2010s marked a period when bilateral trade between Russia and China conducted in local currency gradually rose from negligible levels to considerable shares: the trade was at least 25% in national currencies by 2020, which is a big jump from around 2-3% in the early 2010s. The gradual development of these mechanisms paved the way for more dramatic changes after Western sanctions got stricter in 2022.

The SWIFT system, which is key to dollar-based transactions, has been utilized as a political tool; Russia’s partial disconnect from SWIFT speeded up its transition to the alternative systems and local currencies. The dominance in this infrastructure continues to create structural dependencies and limits the economic independence of non-Western countries.

The de-dollarization measures are amplified by an enlarged BRICS lineup, incorporating energy-laden nations like the UAE and Iraq. Energy exchanges particularly oil have been the mainstay of the dollar’s worldwide supremacy for a long time (the “petrodollar system”). Non-dollar transactions in energy are thereby disputing this standard right away. For instance, in 2023 India took up its first crude oil import from the UAE in Indian rupees, which indicates a transition in the trading of basic commodities outside the dollar routes.

Moreover, BRICS nations have come up with payment systems that are not dependent on the banks’ and payment networks’ traditional setup. One such system is the Cross-Border Interbank Payment System (CIPS) created by China, along with the payment platforms being developed for BRICS countries, that aim at circumventing the western financial points where the flow of money is controlled, allowing for direct national currency settlements. Initiatives such as the Reserve Bank of India’s Special Rupee Vostro Accounts, which by 2025 had spread to more than 150 correspondent banks from 30 countries, provide more than just rhetoric as they exemplify how the local currency trading is being operationalized.

Genuine actions are not limited to purely symbolic acts. Together, Russia, China, and India accomplished a big portion up to 90–95% of their mutual trade in local currencies by 2024–2025, which can be considered one of the most evident milestones in the history of the trade de-dollarization movement. Meanwhile, China has progressively expatriated its currency: slowly and steadily, central banks in different countries are holding renminbi reserves in larger and larger amounts, and this trend is even viewed as a sign of the migration from the dollar-only reserve strategy to broader diversification.

The scenario depicted by these events shows that the process of the dollar losing its dominance is not a quick one, but rather a series of gradual diversifications and institutional alternatives that cannot stand up to the West’s financial volatility and sanctions. Still, the major hurdles linked to the structural factors continue to exist. For now, there is no BRICS currency, and even though there have been occasional proposals, no such unified medium has been formally recognized by the bloc yet. The differing national positions like India’s sticking to its line that de-dollarization is not an important topic highlight the difficulties of coordinating policy across a large scale.

Yet, cutting back on the Western trade and finance avenue would still be of strategic advantage. The increased direct payments in local currencies, together with the use of alternative payment systems, would eventually lessen the Western influence without causing any major disturbance to the global financial system. BRICS could do the following to capitalize on the current situation: they could enhance their internal financial cooperation, enlarge their local currency trade agreements, invest in compatible digital payment infrastructures, and further diversify their reserve holding.

De-dollarization is a multi-layered and slow-moving process that is deeply rooted in geopolitical contestation. The US dollar has very strong roots due to its liquidity, trust from the institutions, and global network effects. The commodities trade that is strategically planned can slowly but surely reduce the Western power and thereby create a more multipolar global trade system in the long run.