Dedollarisation

Dedollarisation refers to efforts by governments, firms and market participants to reduce the use of the U.S. dollar in reserves, trade invoicing and settlement, cross-border finance, and domestic transactions. Motivations are diverse, and include gaining greater economic independence, reducing exposure to U.S. monetary and sanctions policy, lowering currency mismatch and transaction costs, and building local market infrastructure. The channels of dedollarisation are distinct and progress is uneven across them. Since the establishment of the Bretton Woods system, the US dollar has been used as the medium for international trade. The U.S. dollar remains the leading international currency by most measures: foreign-exchange turnover, trade invoicing outside Europe, and the denomination of cross-border assets. However, its share in official reserves has drifted down gradually over two decades.

Dedollarisation refers to efforts by governments, firms and market participants to reduce the use of the U.S. dollar in reserves, trade invoicing and settlement, cross-border finance, and domestic transactions. Motivations are diverse, and include gaining greater economic independence, reducing exposure to U.S. monetary and sanctions policy, lowering currency mismatch and transaction costs, and building local market infrastructure. The channels of dedollarisation are distinct and progress is uneven across them. Since the establishment of the Bretton Woods system, the US dollar has been used as the medium for international trade. The U.S. dollar remains the leading international currency by most measures: foreign-exchange turnover, trade invoicing outside Europe, and the denomination of cross-border assets. However, its share in official reserves has drifted down gradually over two decades. ===Adverse American foreign policies and tariffs=== The dollar's stability and safety as a global safe haven is being undermined by increased political polarization jeopardizing governance or by destabilizing economic policies like ongoing (as of 2026) U.S. tariffs, which cause investors to lose confidence in American assets and the country's overall standing. America and its western allies' foreign policies, such as weaponisation of economic sanctions and SWIFT system, has forced other nations to dedollarise to evade international sanctions. In 2025, during the second presidency of Donald Trump, many countries began moving away from the US dollar as a foreign currency reserve. This coincides with the US beginning to pursue an isolationist foreign policy and an erratic economic policy. In particular, during the 2026 Iran war, Harvard economist Kenneth Rogoff criticised Operation Economic Outcast as being likely to accelerate dedollarisation, cause China and Europe to expand their own international financial systems, and make China retaliate against the U.S. with its own leverage in rare earths and pharmaceuticals. In 2026, Fortune cited EBC Financial Group market analyst Sana Ur Rehman, who argued that France's replacement of its remaining New York-held gold with compliant bars stored in Paris and Canada's creation of the C$25 billion Canada Strong Fund represented a broader phase of dedollarisation involving longstanding U.S. allies rather than primarily geopolitical adversaries. Rehman linked the development in part of tariffs and trade unertainty. Reuters reported that France's operation left the overall size of its golf reserves unchanged and that Banque de France Governor Francois Villeroy de Galhau said the decision was not politically motivated. The Canadian governement described the Canada Strong Fund as part of an effort to build a more independent and resilient Canadian economy. ===Emergence of other nations as power centres=== The popularity of the dollar is also being undermined by the growth of other nations, such as China and India, which are undergoing economic and political reforms that boost the credibility and viability of alternative currencies as safe, stable, and liquid reserves. Hence, a shift toward dedollarisation is altering the global balance of power, with the most severe adverse impact felt in the U.S., likely leading to a broad depreciation and underperformance of its financial assets relative to the rest of the world. While as of 2025 the US dollar is still dominant in foreign exchange market (88%), trade invoicing (40%), cross-border liabilities (48%), and foreign currency debt issuance (70%), its dominance is declining in the foreign currency reserves (from 90% in 1960 to 45% in 2023), the bond market (from earlier 50% to 30% in 2024), and commodity markets (especially in energy where nations like India, China, Brazil, Thailand and Indonesia buy discounted oil and gas discounted price by bypassing the SWIFT sanctions against Russia or Brazil and pay in own local currencies). ===India=== Instead of complete de-dollarization, India is strategically diversifying its foreign exchange reserves to reduce dependency on the US dollar through increasing gold reserves, multi-currency reserves, promoting the use of the rupee in international trade, and internationalization of its Unified Payments Interface (UPI) to reduce reliance on SWIFT vulnerable to US sanctions, Digital Rupee (e₹) and RuPay card for cross-border transactions. ===ASEAN=== ASEAN, a group of 11 Southeast Asian countries in the region, such as Singapore, Malaysia, Indonesia, Cambodia, and Thailand, are currently contemplating the process of de-dollarization in order to diminish their dependence on the US dollar within their economies. These nations have voiced apprehensions regarding the volatility of the dollar's value and the American government's utilization of the dollar embargo mechanism. Consequently, they have developed a keen interest in mitigating their vulnerability to the dollar and exploring alternative currencies. ===SCO=== 97% of trade in 2025 among the Shanghai Cooperation Organisation (SCO) nations - which has 10 full members, including India, Russia, China, Iran, Pakistan, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and Belarus - was in local currencies, not in USD or Euro. This helps circumvent Western nation's weaponisation of economic sanctions and SWIFT system, more sovereignty, faster transections with lower transaction costs, cheaper energy fuel sourced and supplied within SCO nation, and this also sets the framework which can be replicated with other nations, etc. India-Russia: During the Cold War, and ending in 1991, the Soviet Union and India traded in a rupee-ruble exchange. Mutual trading between India and Russia is done mostly in rubles and rupees instead of dollars and euros. In March 2022, India and Russia entered for a Rupee Ruble Trade Arrangement, In which India buys Russian oil in UAE dirham and also in rubles. Russia-Iran: In July 2022, Russia and Iran made modifications in their bilateral trade to reduce the dependency on the US dollar. The new monetary system could mean the debts may be settled in their own countries and could reduce the demand for US dollars by 3 billion a year. In January 2023, Russia and Iran were planning to trade with gold-backed cryptocurrencies as an alternative to the US dollar. China-Pakistan: The power minister of Pakistan announced that the country is considering using yuan to pay for its imports of Russian crude oil. ===Brazil=== Brazil is member of BRICS multilateral organisation, which actively pursue trade in local currencies with member nations. It also has bilateral local currency trade arrangements with the following nations. Brazil-Argentina: In 2023, Argentina and Brazil proposed a common currency for trade which is termed as sur. Sur combines the currency of Argentina's peso and Brazil's real. === China=== China is member of both BRICS and SCO multilateral organisations, both of which actively pursue trade in local currencies with member nations. It also has bilateral local currency trade arrangements with the following nations. China-Australia: In 2013, Australia made an agreement with China to trade in national currencies. China-France: In a significant development, it has been reported that a French company has conducted a transaction with China National Offshore Oil Corporation recently, exporting liquefied natural gas (LNG) and accepting payment in Chinese yuan. The mentioned transaction highlights the growing trend of de-dollarization, which is also making its way into the European Union. ===India=== India is member of both BRICS and SCO multilateral organisations, both of which actively pursue trade in local currencies with member nations. It also has bilateral local currency trade arrangements with the several nations. India facilitates bilateral trade in local currencies, for reducing transection cost and to mitigate dollar rate conversion rate volatility leading to dedollarisation, using two mechanism - Local Currency Settlement Agreement (LCSA) and Special Rupee Vostro Accounts (SRVA) to enable rupee-denominated trade. India also interfaces India's Unified Payments Interface (UPI) with these nation's payment platforms. Local Currency Settlement Agreement (LCSA) - at least 7 nations in 2024: Africa: Nigeria (India's second-largest trading partner in Africa) Tanzania, Asia: Indonesia, Bhutan, Malaysia, Nepal, United Arab Emirates (UAE), Special Rupee Vostro Account (SRVA) arrangement - at least 26 countries in 2024: In August 2025, the RBI simplified the process by allowing AD Category-I banks to open SRVAs for correspondent banks without seeking prior RBI approval. Additionally, in October 2025, the RBI permitted SRVA balance holders to invest in corporate debt securities, expanding beyond the previously allowed government securities. Asia: Bangladesh, Israel, Kazakhstan, Malaysia, Maldives, Myanmar, Oman, Russia, Singapore, Sri Lanka, Tajikistan. Africa: Botswana, Kenya, Mauritius, Seychelles, Sudan, Tanzania, Uganda Americas: Cuba; Europe: Belarus, Germany, Luxembourg, United Kingdom; Oceania: Fiji, New Zealand South America: Guyana ===Indonesia=== Indonesia is member of BRICS multilateral organisation, which actively pursues trade in local currencies with member nations. It also has bilateral local currency trade arrangements with the following nations. Indonesia-South Korea: In early May 2023, the central banks of South Korea and Indonesia entered into a memorandum of understanding aimed at fostering collaboration in advancing the utilization of their respective currencies for bilateral transactions moving away from the US dollar as an intermediary. This includes promoting the use of their currencies for activities like current account transactions and direct investment between the two countries. ===Other countries=== Chile has focused its efforts on introducing indexed instruments to attract investors' attention away from dollar-denominated assets. The majority of these instruments have been linked to the consumer price index (CPI) by establishing a unit of account known as the 'Unidad de Fomento' (UFs). ===Redollarisation=== Economists at Standard Chartered have pointed out a trend of redollarisation rather than dedollarisation in the global financial system. Divya Devesh, co-head of foreign exchange research for ASEAN and South Asia at the bank, has noted that exporters tend to retain dollars and find U.S. equities to be an attractive investment, citing Taiwan as an example. Eric Robertsen, the bank's chief strategist and global head of research, has said that the alternatives to the U.S. dollar are not very appealing, predicting that the currency is not going to lose its status in the near or medium term. ==See also== Criticism of the Federal Reserve Cross-Border Interbank Payment System

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