This article analyses the BRICS-sponsored de-dollarisation campaign as a cautious, historically informed reaction to both long-run structural developments in the international monetary system and recent geopolitical tensions, specifically U.S. tariff hikes and financial sanctions. On earlier precedents in history, i.e., the demise of the British pound sterling after World War II and that of the Bretton Woods system, the argument puts de-dollarisation in its proper place as not an exception but a natural phenomenon in the history of money (Eichengreen, 2011). Empirical findings based on data from the International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves (COFER) indicate a consistent downward trend in the proportion of the U.S. dollar from more than 70% during the late 1990s to less than 60% in recent years with step-wise improvement for emerging-market currencies like Chinese renminbi. Bank for International Settlements and Society for Worldwide Interbank Financial Telecommunication data illustrating greater cross-border settlement through BRICS currencies, especially RMB-denominated trade corridors facilitated by institutional innovations like China’s Cross-Border Interbank Payment System and the BRICS Contingent Reserve Arrangement. Central bank bilateral swap arrangements further facilitate local-currency liquidity, lowering dependence on dollar-clearing arrangements. While tariffs and sanctions deepen the political and strategic incentive to diversify away from the dollar, the analysis concludes that de-dollarisation only endures on the basis of deepening alternative currency markets, improving liquidity, and establishing credible, interoperable payment infrastructures. The spillovers of this transition involve diminished exposure to U.S. monetary policy spillovers, amplified monetary independence for BRICS members, and a gradual evolution toward a more multipolar currency system. But with deep-seated network effects and dollar liquidity advantages in mind, the conversion will be likely to be partial, one-way, and place-based in the short term.
Sathyanarayana et al. (Thu,) studied this question.