tl;dr
The article examines whether the BRICS alliance can replace the US dollar (USD) as the dominant global currency. BRICS, consisting of Brazil, Russia, India, China, South Africa, and recent additions like Egypt, Ethiopia, Iran, Indonesia, and the UAE, aims to de-dollarize and create alternatives to W...
BRICS, a coalition of emerging economies including Brazil, Russia, India, China, South Africa, and recent members like Egypt, Ethiopia, Iran, Indonesia, and the UAE, aims to reduce reliance on the US dollar through de-dollarization and potentially develop a joint digital currency. While this move challenges the dollar’s supremacy, it does not intend to replace it outright, given the USD's deep entrenchment in global finance and trade.
The US dollar remains the dominant global reserve currency, involved in approximately 90% of foreign exchange transactions and accounting for roughly 60% of central bank reserves. It underpins much of global trade and debt markets, making it difficult for any immediate competitor to displace its role.
Meanwhile, the rise of USD-backed stablecoins in the United States, supported by evolving regulatory frameworks and significant private sector investment, could further reinforce the dollar's dominance worldwide by enabling digital access to the currency across various blockchain networks.
BRICS economies collectively represent a significant share of global GDP and population, possibly reducing internal demand for the dollar. However, the dollar's entrenched position means it is expected to remain dominant globally for decades. Interestingly, a reduced global demand for the dollar driven by BRICS' success might benefit the US economy by lowering the real value of US debt and boosting export competitiveness.
Despite BRICS exploring alternatives such as digital currencies and advocating for de-dollarization, challenges such as the coalition’s diverse membership and lack of a unified monetary or political system limit their ability to mount a full-scale replacement of the USD. The ongoing dominance of the dollar is supported by its liquidity, transparency, and the safe haven status of US financial markets.
Looking ahead, if China's economy surpasses that of the US, BRICS could pose a more substantial challenge to the dollar's dominance. Even then, the dollar’s role as the global reserve currency is poised to remain secure for the foreseeable future, with BRICS influencing but unlikely to wholly overtake its central position in international finance.