Is the U.S. dollar’s global dominance on the verge of decline? Recent developments among the BRICS nations—Brazil, Russia, India, China, and South Africa—suggest they believe so. For decades, the U.S. dollar has been the world’s reserve currency, used for international trade and as a store of value by central banks around the globe. However, with growing tensions between the U.S. and several of these emerging economies, there has been a push towards creating alternative financial systems that could challenge the dollar’s supremacy.
The 2024 Kazan Summit held in October brought forth ambitious plans further cementing the shift away from the dollar and towards a more multipolar currency system. The traditional financial order that the U.S. and G7 countries have long dominated is now facing fierce competition from the BRICS nations, who have been rapidly gaining economic and political influence in the global arena.
At the heart of this push for financial independence lies concerns over the U.S.’s use and abuse of its position as the world’s reserve currency. From imposing sanctions on nations to manipulating interest rates and printing money, the BRICS countries argue that the U.S. has been able to exert too much control over global financial systems for its own benefit. But will these efforts be enough to dethrone the “almighty” dollar? And what does this mean for Americans and the global economy?
The New BRICS Landscape Expansion and Goals
Originally composed of just Brazil, Russia, India, China, and later South Africa, the BRICS nations have since rapidly expanded their influence and reach. In January 2024, the bloc welcomed five new countries into its fold—Iran, the United Arab Emirates (UAE), Saudi Arabia, Ethiopia, and Egypt—to form BRICS+, a term coined to represent the new extended alliance. This expansion not only adds to the group’s economic and political power but also diversifies its resources, with some of the world’s largest oil-producing countries now involved.
With these new additions, the BRICS bloc now represents 45% of the world’s population and over one-third of the global GDP. Compared to the G7, the traditional group of wealthy industrialized nations, BRICS+ countries have a significantly higher growth rate and are projected to become the largest economic bloc by 2050. Already, the BRICS nations have surpassed the G7 in terms of GDP purchasing power parity—a measurement that considers the cost of living and currency exchange rates. This rapid growth has allowed the BRICS countries to become formidable players on the global economic stage, challenging the Western-dominated world order that has existed since World War II ended.
But what are the goals of this new BRICS landscape? The bloc’s expansion and its increasing economic power have led to a myriad of initiatives to strengthen its position and challenge the status quo. One of the most notable developments was the establishment of the BRICS Development Bank, also known as the New Development Bank (NDB). This bank provides loans for infrastructure projects and sustainable development in member countries and other developing nations, challenging the influence of institutions such as the World Bank and the International Monetary Fund (IMF). The BRICS nations have also formed a Contingent Reserve Arrangement, which acts as a financial safety net for member countries in times of economic crisis.
In addition to economic cooperation, the BRICS nations have also sought to increase political and diplomatic ties. The first formal meeting of the bloc took place in 2009, with subsequent summits being held annually. Over the years, various joint declarations and agreements have been signed, covering a wide range of issues from trade and investment to education, science, and technology. This increased cooperation has allowed the BRICS nations to have a stronger voice on the global stage as they advocate for their interests and challenge Western hegemony. A united front that, they say, demands fairer representation in international organizations and decision-making processes, as well as a more equitable distribution of resources and power.
How Russia’s Sanctions Sparked a Push for BRICS Financial Independence
Following Russia’s invasion of Ukraine in 2022, the country was dealt a heavy blow, with Western countries imposing a litany of economic sanctions that sent its economy into a tailspin. While Russian President Vladimir Putin has been vocally critical of the Western-dominated financial system for years, the sanctions only furthered his resolve to reduce the country’s dependence on the U.S. dollar and Western financial institutions—a catalyzer moment for Russia’s efforts to strengthen the BRICS bloc as an alternative economic power.
“The dollar is being used as a weapon. We really see that this is so. I think that this is a big mistake by those who do this,” Putin stated at the Kazan Summit. This sentiment is shared by other BRICS nations, who fear being at the mercy of Western economic sanctions. With the rise of protectionism and trade tensions between major economies, BRICS nations see the bloc as a way to inculcate a more equitable global financial order—one where they are not marginalized but rather have a greater stake in shaping international economic policies.
As one of the founding members, Russia has been instrumental in shaping the BRICS agenda, particularly in finance. But the country’s efforts to bolster the bloc’s financial leadership have grown in recent years, especially as its own economy struggles under the weight of sanctions. Putin opened the Kazan Summit with a call for BRICS nations to move away from the payment systems and reserve currencies dominated by Western powers and towards greater usage of national currencies in cross-border transactions. This would provide a much-needed boost to Russia’s national currency, the ruble, while reducing its reliance on the U.S. dollar.
BRICS Pay, A New Era of Financial Sovereignty?
In line with Putin’s vision, BRICS nations have been working towards creating their own payment system, dubbed BRICS Pay. This system is set to become the cornerstone of their financial independence, allowing them to bypass traditional payment systems like SWIFT (Society for Worldwide Interbank Financial Telecommunication) that the U.S. and its allies dominate. Built on blockchain technology, leaders of the bloc have touted BRICS Pay as a secure, transparent, and efficient way to conduct financial transactions between member countries. Analysts say it could save BRICS nations an estimated $15 billion annually in transaction fees if widely adopted.
Using a network of central banks and commercial banks, BRICS Pay would allow member countries to conduct business with each other using their own national currencies without the need for conversion to a third currency such as the U.S. dollar. An alternative payment system that Putin believes would promote fairer economic competition and reduce the risk of sanctions for BRICS countries. “The question is very important today. One of the key issues is the problem of settlements,” Putin stated after the summit. This is a problem that has been highlighted by the increasing use of sanctions as a weapon in international politics, affecting not only Russia but also other BRICS nations like China and Iran.
Already, major financial institutions, including the Bank of China, the Bank of India, Punjab National Bank, and Brazil’s Banco do Brasil and Caixa, have expressed support for the initiative, with many others expected to follow suit. In 2023, digital transaction volumes in BRICS economies hit a record high of $3.25 trillion, marking a year-on-year growth of 26.1%. Forecasts indicate that in 2032, this market could swell to $39.3 trillion, with China anticipated to account for nearly half of the expenditures.
“As a group of emerging market countries, the significance of launching such a payment system for BRICS is evident… It carries practical implications for safeguarding the economic sovereignty of developing countries and expanding economic and trade cooperation,” said Song Wei, a professor at the School of International Relations and Diplomacy at Beijing Foreign Studies University. As digital payments become increasingly popular worldwide, BRICS Pay could also serve as a model for other developing nations looking to reduce their reliance on US-dominated financial systems. A move that could ultimately lead to a world where a single country or currency no longer dominates international payments, experts say.
The Implications of BRICS Pay for U.S. Debt and Global Finance
Though the summit did not produce any concrete agreements, it laid a strong foundation for future development among BRICS nations. It also highlighted the growing support for the “de-dollarization” movement, as countries seek to insulate themselves from the risks of using the U.S. dollar as a primary currency for international transactions. As for BRICS Pay, while it is still in its early stages, its potential impact on the global financial landscape is undeniable. “The drive for payments autonomy, fueled by technology, is perhaps the most underappreciated risk to USD hegemony,” warned Joyce Chang, Chair of Global Research at J.P. Morgan.
Should BRICS Pay continue to gain momentum and prove successful in its implementation, the already shrinking share of the U.S. dollar in global foreign exchange reserves could dwindle even further. If foreign investment demand for U.S. treasury securities declines, so too could the value of the dollar. This could make it more expensive for the U.S. to borrow money, impacting its ability to fund its swelling record levels of national debt. And with net interest payments on U.S. debt already topping $890 billion a year, any increase in borrowing costs could have dire consequences for the country’s fiscal. Everything from mortgages and car loans to credit card interest rates could rise, squeezing the average American’s wallet further. Experts say it could also lead to a decrease in the value of the dollar relative to other currencies, making imports more expensive for American consumers and businesses.
As the BRICS nations continue to establish stronger economic ties and explore alternative payment systems, the dominance of the U.S. dollar in global trade may face its biggest challenge yet. With their large populations, vast resources, and growing economies, the BRICS nations have the potential to create a formidable force in the global economy. And while it’s unlikely that the U.S. dollar will completely lose its status as the world’s reserve currency, the rise of the BRICS bloc could mean that the once seemingly unshakable foundation of the U.S. economy could face some serious competition in the future.
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