The international monetary system is not moving suddenly away from the US dollar. Yet beneath the apparent stability of the dollar's global role, an important change is taking place. Countries are increasingly exploring alternative arrangements for cross-border payments, local-currency settlement and regional financial connectivity. The BRICS Cross-Border Payments Initiative, China's growing use of the renminbi in trade, and India's internationalisation of the Unified Payments Interface (UPI) are all part of this wider development.

It would be misleading to describe this simply as “de-dollarisation”. A more useful description is financial diversification or de-concentration. Countries are seeking additional currencies, payment channels and sources of finance so that international transactions do not depend excessively on one currency or one financial architecture.

This matters particularly for developing countries, where external debt, foreign-exchange availability and exchange-rate movements can interact to create financial vulnerability.

BRICS and Changing Payment Architecture

BRICS has been working on a Cross-Border Payments Initiative aimed at improving interoperability among national payment systems and facilitating cross-border payments. The 2025 Rio de Janeiro Declaration called for continued work by finance ministers and central-bank governors on this initiative and recognised progress by the BRICS Payment Task Force. BRICS has also encouraged greater use of local currencies in trade and finance.

This should not be confused with the creation of a common BRICS currency or with an imminent replacement for the dollar-based financial system. Its immediate significance is more practical: creating additional channels through which participating countries can conduct and settle international transactions.

The distinction between payment infrastructure and currency is critical. A payment system determines how money moves across borders; a currency carries exchange-rate, liquidity and monetary risks. Alternative payment systems can reduce transaction costs, settlement delays and dependence on correspondent banking networks, but they cannot by themselves eliminate foreign-exchange risk.

Why it Matters for Debtors and Creditors

For debtors, the most important issue is currency mismatch. A country that borrows in foreign currency but earns most of its income in domestic currency becomes vulnerable when its currency depreciates. The domestic-currency burden of external debt can rise sharply even when the amount borrowed has not changed.

Alternative currency arrangements can help when the currency of borrowing is aligned with the currency of export earnings. A country with substantial trade revenues in renminbi, for example, may find renminbi financing useful if it can service the debt from those revenues. Similarly, dollar borrowing is less problematic when export revenues are predominantly dollar-linked.

The objective, therefore, should not be to replace the dollar with another politically preferred currency. It should be to reduce unnecessary currency mismatches.

But diversification can also create new risks. A country that replaces dollar debt with renminbi debt without generating sufficient renminbi revenues has not eliminated foreign-exchange risk; it has merely changed its form. Borrowers must consider the liquidity, convertibility and policy characteristics of the alternative currency as well.

The same principle applies to creditors. Alternative settlement systems can reduce conversion costs and facilitate lending in the currency of the underlying trade relationship. But creditors also acquire exposure to the alternative currency and its financial system. Diversification therefore means redistribution of risk, not elimination of risk.

The Dollar Remains Dominant

These developments should not be exaggerated. The dollar remains deeply embedded in international trade, financial markets and foreign-exchange transactions. The BIS's 2025 Triennial Survey found that the US dollar was on one side of 89 percent of global foreign-exchange transactions, while the renminbi was involved in 8.8 percent. Even in renminbi transactions, the dollar remains the principal counterpart currency.

The IMF's reserve data tell a similar story. The dollar continues to account for well over half of allocated global foreign-exchange reserves, while the renminbi remains a relatively small reserve currency.

The dollar's strength is not simply a result of political influence. It is supported by the depth and liquidity of US financial markets, the availability of dollar-denominated assets and the network effects created by decades of international use.

There is therefore little reason to expect a rapid “end of the dollar”. The more plausible development is a gradual expansion of alternative currencies and payment systems alongside continued dollar dominance.

Why Global South Should Pay Attention

This distinction is particularly important for South Asia and Global South nations. Many economies in the region remain sensitive to foreign-exchange availability because of their dependence on imports, remittances, tourism receipts and external borrowing. For countries carrying substantial foreign-currency debt, a sharp depreciation or tightening of global financial conditions can quickly increase debt-servicing pressures.

More efficient payment infrastructure could provide genuine benefits. Faster and cheaper cross-border payments could reduce the cost of remittances, facilitate tourism and trade, and make smaller-value regional transactions easier. For smaller economies, reducing dependence on a limited number of correspondent banking relationships could also improve resilience.

But payment-system diversification should not be confused with debt sustainability.

A country facing an external financing crisis cannot solve its underlying problem simply by changing the payment channel through which it transfers money. If export earnings are inadequate, reserves are low and debt-service obligations are excessive, cheaper payment infrastructure will not create the foreign exchange needed to meet those obligations.

This is the central limitation of the current debate.

Payment infrastructure can improve efficiency and liquidity; it cannot substitute for solvency.

India's potential role

India's experience offers an important regional example. The Reserve Bank of India (RBI) has been developing international linkages for UPI and has joined Project Nexus, which seeks to connect domestic instant-payment systems across participating countries. The initial group includes India and the fast-payment systems of Malaysia, the Philippines, Singapore and Thailand. RBI has identified faster, cheaper and more efficient cross-border retail payments as a major objective.

India has also pursued bilateral arrangements combining payment connectivity with local-currency settlement. These developments suggest that international payment diversification need not be framed purely as a geopolitical contest with the dollar. It can also be driven by straightforward economic benefits.

India could potentially become a bridge between regional economies and the wider Asian and Global South payment architecture. Greater interoperability could support remittances, tourism, trade and financial inclusion while reducing some transaction costs.

But this opportunity will require strong regulatory cooperation, cybersecurity, anti-money-laundering safeguards and reliable settlement arrangements. Interoperability without institutional credibility could simply create new vulnerabilities.

Policy Lesson for Global South 

The appropriate strategy for Global South economies is therefore diversification rather than substitution.

Replacing dollar dependence with dependence on another foreign currency would not constitute genuine financial resilience. Instead, countries should seek a balanced combination of domestic-currency financing, appropriately diversified foreign-currency debt and stronger regional payment links.

Where possible, the currency of external borrowing should be aligned with the currency of export earnings. Domestic capital markets should be deepened so that governments and companies have greater access to local-currency financing. External creditors should be diversified, and foreign-exchange reserves should remain adequate to manage periods of market stress.

The maturity structure of debt is equally important. Even a well-diversified currency portfolio can become vulnerable if large amounts of external debt fall due simultaneously.

The objective should therefore be to reduce currency, liquidity and refinancing risks together.

From De-dollarisation to De-concentration

The emerging financial landscape is best understood not as a battle between the US dollar and BRICS, but as a gradual movement towards a more plural financial architecture. The dollar is likely to remain the principal global reserve and vehicle currency for many years. The renminbi and other currencies may nevertheless acquire greater importance in particular regions and bilateral trade relationships. Regional payment systems may increasingly connect with one another, while local-currency settlement expands where there is a sound economic basis for it.

 For the Global South, this creates an opportunity—but also a responsibility. The goal should not be to abandon the existing international monetary system. Nor should countries assume that every alternative arrangement is automatically safer. The goal should be to create more choices without creating new dependencies. 

For debtors, this means reducing dangerous currency mismatches and excessive concentration of external liabilities. For creditors, it means developing new channels for finance while properly pricing currency, liquidity and sovereign risks.

The future is therefore unlikely to be a post-dollar world.It may, however, become a less concentrated financial world.

For South Asia and the Global South, that distinction is crucial. The real value of BRICS payment initiatives, regional payment connectivity and local-currency settlement is not that they will make the dollar disappear. Their value is that they could give emerging economies greater flexibility in how they trade, borrow, lend and settle payments.

Ultimately, the test should be simple: do these new arrangements make countries more resilient when exchange rates fall, global liquidity tightens and external debt becomes harder to service?

If they do, they will have achieved something far more useful than simply challenging the dollar.

(The writer is a retired Special Secretary, Government of India, and a commentator on financial, geoeconomic and regional issues. The views expressed are personal. He can be reached at ppmitra56@gmail.com.)