For decades, the international monetary system has rested on an extraordinary arrangement: the currency issued by one country became the principal medium through which the rest of the world conducts much of its trade, stores its reserves and finances its debts. The United States did not need to control every shipping lane, commodity exchange or financial institution to benefit from this position. The dollar's central place in the global economy gave Washington an influence that extended far beyond the borders of the American economy.
That arrangement is now being questioned more openly than at any time in recent decades. China is promoting the international use of the renminbi. Russia has redirected much of its external trade towards non-Western partners and alternative payment channels. Several emerging economies are exploring settlements in their own currencies. Central banks have continued to accumulate gold, while governments increasingly discuss the risks of excessive dependence on financial infrastructure that can be influenced by geopolitical decisions.
The word used to describe this movement is de-dollarization. It has become a familiar term in political speeches, financial commentary and BRICS declarations. But the expression can be misleading. It suggests a coordinated campaign to replace the dollar, perhaps with a new international currency. The reality is more complicated. What is taking shape is not yet a new monetary order, but an attempt by several countries to reduce their exposure to a system in which the dollar occupies an unusually powerful position.
The distinction is important. The dollar is not disappearing. Its competitors are not yet capable of reproducing the financial infrastructure, liquidity and international confidence that sustain its dominance. Yet the incentives to diversify are real, and they are gradually changing the calculations of governments, central banks and international businesses.
The privilege of issuing the world's currency
The dollar's international position is often attributed to the economic and military power of the United States. Those factors matter, but they do not fully explain why companies in Asia, Africa or Latin America continue to use the dollar when trading with partners who have no direct commercial relationship with America.
The deeper explanation is the network itself.
A currency becomes more useful as more people use it. An exporter accepts dollars because its suppliers may also demand dollars. A bank holds dollar assets because its clients need them. A shipping company prices services in dollars because its insurance, fuel and financing arrangements are often linked to the same currency. Commodity producers and buyers use it because the market is already organised around dollar-denominated contracts.
This creates a self-reinforcing system. The dollar is not simply another currency available to international traders; it is the common language of a large part of international commerce.
The American financial system reinforces this advantage. Its Treasury market offers an enormous pool of securities that can be bought and sold in large quantities. Investors can move substantial sums without necessarily causing the kind of disruption that would occur in smaller markets. The dollar also benefits from a broad network of correspondent banks, established legal and financial institutions, and a deep market for hedging currency risks.
For a central bank managing hundreds of billions of dollars in reserves, these characteristics are not minor conveniences. Liquidity, reliability and the ability to mobilise assets during a crisis are essential.
This helps explain why the dollar's position has proved so resilient despite repeated predictions of its decline. According to the International Monetary Fund's latest COFER figures, the dollar represented 56.7 per cent of allocated global foreign-exchange reserves in the second quarter of 2026, down from 57.18 per cent in the previous quarter. Its share has declined over the longer term, but it remains far ahead of any individual competitor.
The important point is that a declining share does not automatically mean a collapsing system. The dollar can lose some of its relative weight while remaining the dominant international currency for many years.
The political cost of financial dependence
The debate changed considerably after the financial sanctions imposed on Russia following its invasion of Ukraine in 2022. The restrictions demonstrated that access to international financial infrastructure could become a central instrument of geopolitical pressure.
For governments that maintain difficult relations with Washington or its allies, the episode raised a strategic question: how secure are foreign-exchange reserves if access to them depends, in certain circumstances, on political relationships?
This concern is not limited to countries under sanctions. Governments that have no immediate confrontation with the United States may still consider it prudent to reduce the concentration of their reserves and diversify their payment channels. A country does not need to reject the dollar to recognise the risks of relying too heavily on one financial system.
There is also an economic dimension. When international trade is conducted in dollars, a country whose principal trading partners use other currencies may face additional conversion costs and exposure to movements in the dollar exchange rate. If two countries can settle a transaction directly in their own currencies, they may reduce some of these costs and the need to obtain dollars for that particular payment.
But financial diversification has limits. A payment made in yuan rather than dollars does not necessarily eliminate the need for dollar liquidity elsewhere in the transaction. The exporter may still need dollars to pay for imported machinery, insurance, shipping or debt service. Nor does a local-currency settlement automatically create a deep market in which that currency can be invested or converted.
The political incentive to diversify is therefore stronger than the practical ability to replace the dollar.
The return of gold
One of the clearest signs of this search for diversification has been the renewed interest in gold.
Unlike a foreign currency, gold is not a liability issued by another government. It does not depend on the solvency of a foreign central bank, and it cannot be created through monetary policy. Once held in a country's own custody, it can serve as a reserve asset outside the conventional network of foreign-currency claims.
This gives gold a particular attraction during periods of geopolitical uncertainty. It is not a replacement for foreign-exchange reserves, but it can reduce dependence on them.
Central-bank purchases have remained substantial. The World Gold Council estimated net purchases by central banks and other institutions at approximately 863 tonnes in 2025. That was below the exceptional levels recorded in each of the previous three years, but still well above the 2010–2021 annual average of 473 tonnes.
The purchasing pattern is also revealing. Poland added 102 tonnes in 2025, Kazakhstan 57 tonnes and China 27 tonnes, according to the Council's reported figures. These purchases reflect different national circumstances, and it would be simplistic to attribute every transaction to a single geopolitical motive. Nevertheless, the broader trend indicates that gold has regained importance in the reserve strategies of several emerging economies.
Its rising market value has also attracted attention. By the end of 2025, gold represented a larger share of total official reserves by market value than either the euro or US Treasury securities, according to the European Central Bank's June 2026 review.
Yet this development requires careful interpretation. Gold's market price rose sharply in 2024 and 2025. That increase mechanically raised the dollar value of existing gold holdings, even when central banks did not purchase additional metal. The ECB noted that if gold were valued at its end-2023 price, its share of reserves would be considerably lower.
The Federal Reserve made a similar point in a September 2026 analysis. It argued that the apparent overtaking of foreign official Treasury holdings by global gold reserves was heavily influenced by valuation effects and by the large historical gold holdings of a small number of countries. By June 2026, foreign official holdings of US Treasuries again exceeded the value of global gold reserves excluding US holdings.
Gold's return is therefore significant, but it does not demonstrate that central banks have abandoned government securities. The two assets serve different purposes. Treasury securities provide liquidity and interest income; gold offers a reserve asset without the credit exposure of another government's liabilities. A prudent reserve strategy may need both.
BRICS and the search for alternatives
The BRICS grouping has become the most visible political platform for discussions about reducing reliance on the dollar. Its members represent a substantial share of the world's population, energy production, industrial output and commodity trade. Their combined economic weight gives them an incentive to explore financial arrangements that reflect their growing role in the global economy.
But the political ambition is running ahead of the institutional reality.
The BRICS debate is often presented as a project to create a common currency capable of challenging the dollar. Such a proposal faces formidable obstacles. The participating economies have different monetary policies, inflation rates, capital controls, financial regulations and political priorities. Their trade balances are also uneven. A common currency would require far more than a declaration of intent: it would need a credible monetary authority, rules for managing imbalances, mechanisms for financial support and a deep market for assets denominated in that currency.
There is no evidence that such a system is close to becoming operational.
The more practical objective is to make existing national currencies more usable in trade between members. A Chinese company could, for example, receive payment in renminbi from an importer rather than requiring that transaction to pass through dollars. An Indian buyer and a Russian supplier could explore settlement arrangements using their respective currencies, subject to the availability of a workable exchange and payment mechanism.
These arrangements can be useful even without a common currency. They do not require every member to agree on a single monetary policy. They can also develop gradually, transaction by transaction.
The BRICS New Delhi Declaration of September 2026 reflects this more cautious approach. It acknowledged ongoing work on cross-border payment mechanisms and discussions about using local currencies for trade and investment. It did not announce a new common currency or a fully operational alternative payment system. Instead, it encouraged further technical work on interoperability, efficiency and financial infrastructure.
That is a more modest achievement than some political headlines suggest, but it is also a more realistic one. The development of alternative payment channels may matter long before any serious attempt is made to create a new international reserve currency.
China's opportunity — and its constraints
China is central to any discussion of a more diversified monetary system. It is the world's largest trading nation by merchandise trade, a major industrial producer and an increasingly important lender and investor across Asia, Africa and Latin America.
The renminbi has gradually expanded its international role. China's trade relationships give it opportunities to encourage suppliers and customers to accept payments in its currency. Its financial institutions have also developed channels for cross-border transactions that can operate outside some of the conventional dollar-centred infrastructure.
But China's economic scale should not be confused with the international status of its currency.
A reserve currency must be widely accessible, convertible and supported by financial markets that foreign investors trust. China's capital controls and the state's extensive influence over its financial system complicate that process. Foreign central banks and private investors may be willing to hold renminbi for specific commercial purposes, but that is not the same as treating it as a universal reserve asset.
The International Monetary Fund's 2025 research on trade invoicing, covering 132 economies from 1990 to 2023, found that renminbi use had grown steadily and spread beyond Asia, but remained modest. The dollar continued to dominate global trade invoicing, and the study found no robust evidence that policy initiatives had effectively reduced dollar reliance in oil exports.
This is a crucial distinction. China can increase the use of its currency in bilateral trade without necessarily turning it into the principal currency of global finance.
The renminbi's future international role will depend not only on China's economic weight, but also on the confidence foreign institutions have in the openness, convertibility and predictability of its financial system.
Why the dollar is difficult to replace
The main weakness of the de-dollarization debate is that it sometimes treats the dollar as though it survives only because other countries have not yet organised themselves against it.
In reality, the alternatives face their own limitations.
The euro has the advantage of a large economic area, established institutions and relatively open financial markets. But the euro area does not have a single national treasury market comparable in scale and simplicity to the US Treasury market. Its financial and fiscal architecture remains divided among member states.
The renminbi benefits from China's industrial and commercial reach, but capital controls limit its appeal as a freely convertible reserve asset. The Japanese yen and British pound have established international roles, but their economies and financial markets are not large enough to replace the dollar's global position.
Gold avoids the political and credit risks associated with foreign currency claims, but it has other disadvantages. It does not pay interest, its market price can fluctuate sharply, and physical holdings must be stored and protected. It is also not an efficient instrument for settling the enormous daily volume of international payments.
A multipolar monetary system, if it develops, is therefore unlikely to be built around one successor. It may instead consist of a wider range of currencies and assets, each serving particular markets and strategic purposes.
The dollar could remain the leading reserve and transaction currency while the euro becomes more important in European trade, the renminbi expands in China's commercial network, and gold occupies a larger place in the reserve portfolios of countries seeking protection against geopolitical and financial risks.
That would be a meaningful change, even without a dramatic monetary rupture.
The transition will be measured in infrastructure, not declarations
The future of de-dollarization will ultimately depend on practical infrastructure.
A country needs more than a political agreement to settle trade in local currencies. It needs banks able to provide liquidity, reliable exchange-rate mechanisms, clearing and settlement systems, access to credit, and financial instruments in which exporters can hold the proceeds of their transactions. It also needs confidence that those proceeds can be converted or invested when required.
For energy exporters, the challenge is particularly important. Oil and gas contracts are deeply integrated into international pricing, financing and insurance arrangements. Changing the currency used for a particular sale may be possible, but changing the entire financial ecosystem around the transaction is much more difficult.
This is why the development of alternative payment networks, currency-swap arrangements and local financial markets deserves more attention than declarations about a new global currency. These are the foundations on which a more diversified system could eventually be built.
For countries in Africa and the wider developing world, the implications are practical. A more diversified monetary system could reduce some transaction costs, widen access to trade finance and give governments additional options when managing external payments. But it could also introduce new risks if countries accumulate currencies that are difficult to convert, invest or use to pay for imports.
Diversification is not automatically safer. Its value depends on the quality and liquidity of the alternatives.
A gradual redistribution of monetary power
The international monetary system is not on the verge of abandoning the dollar. Its dominance remains supported by the scale of American financial markets, the currency's extensive use in trade and finance, and the absence of an alternative with comparable reach.
But the assumptions that sustained the system are being reconsidered. The freezing of foreign reserves, geopolitical fragmentation, the growth of China's commercial network and the renewed accumulation of gold have encouraged governments to think more carefully about the concentration of financial risk.
The most likely transformation is therefore not the sudden arrival of a new monetary hegemon. It is a gradual redistribution of functions. Some trade may be settled in local currencies. Some reserves may shift towards gold or other assets. Regional payment systems may become more useful. The dollar may lose part of its relative share without losing its central role.
There is a lesson in this distinction. Monetary power is not determined by the number of countries that announce their intention to challenge a currency. It is determined by the financial infrastructure that businesses, banks and governments actually use.
The dollar built that infrastructure over decades. Its competitors are now trying to build alternatives. Whether they succeed will depend less on political declarations than on the slow, technical work of creating markets, institutions and confidence.
The world may be moving towards a more diversified monetary order. The dollar, however, is likely to remain at its centre for some time yet.
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