Why de-dollarization discussions are more talk, less action

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.