With cross-border payment system, can Brics countries take on the US dollar?

The 17th Brics Summit held in Brazil’s Rio de Janeiro has come to an end. The one big takeaway from the annual summit was that the leaders of the Brics countries have decided to move forward on implementing a cross-border payments system, creating an alternative system to SWIFT, the main global interbank payment network.

Notably, this development comes amid tariff threats from US President Donald Trump, who views the bloc and its efforts at designing a new payment system as attempts to dethrone the dollar — aka dedollarisation.

Brics leaders and a new payment system

The heads of state of the bloc’s member countries — including Prime Minister Narendra Modi — said they are committed to implementing a cross-border payments system, which would make transactions between member countries more accessible, faster and safer. Moreover, it would be an alternative to the existing system, known as the SWIFT Banking System .

The Leaders’ Declaration read, “We task our ministers of finance and central bank governors, as appropriate, to continue the discussion on the Brics Cross-Border Payments Initiative, and acknowledge the progress made by the Brics Payment Task Force in identifying possible pathways to support the continuation of discussions on the potential for greater interoperability of Brics payment systems.”

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The statement further read, “In this regard, we welcome the ‘Technical Report: Brics Cross-border Payments System’, which reflects members’ revealed preferences, and should play a pivotal role in our efforts to facilitate fast, low-cost, more accessible, efficient, transparent and safe cross-border payments among Brics countries and other nations and which can support greater trade and investment flows.”

Later, in a press conference, Ministry of External Affairs (MEA) Secretary Dammu Ravi told reporters that India backed the Brics Cross-Border Payments Initiative and that it would “gain traction” in the coming days.

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“Countries are looking for alternatives. Interoperability in payments is a faster mechanism in terms of being able to do cross-border trading. This is a low-cost solution. India has been successfully implementing it (through United Payments Interface) and we are also entering into bilateral arrangements with many countries.

“We are hopeful that in the days to come, there will be traction. And countries will accept it, as it is beneficial for most of them,” the senior official said.

About the Brics Cross-Border Payments Initiative

But what exactly are the members of Brics proposing? What is this Brics Cross-Border Payments Initiative?

The Brics Cross-Border Payments Initiative (BCBPI) was first proposed in 2015 to facilitate trade between Brics nations easily by using local currencies, thereby reducing reliance on the US dollar.

In the recent past, Russia and China — two of Brics’ biggest members — have long been trying to move away from trade in the US dollar. For Russia , since it invaded Ukraine in 2022 and began the war, its forex reserves in dollars and euros have been frozen and its financial system has been heavily hit by sanctions. It has also been barred from the West-powered SWIFT banking system.

Similarly, China too, has pushed for less dependency on the US dollar; it has launched a sweeping campaign to promote the yuan’s global role . In a speech last month, Chinese central bank governor Pan Gongsheng outlined a vision in which the country’s financial markets are more open and the yuan plays a central role in the world’s capital flows.

Other Brics countries are also wary of SWIFT’s universality. Many countries state that they lack influence in decision making in the use of SWIFT and are wary of using it as a political tool. This has led to many non-Western countries to seek an alternative, which, in turn, would also reduce dependency on the US dollar.

In 2023, Brazil’s president Luiz Inácio Lula da Silva also called on countries to work towards replacing the US dollar with their own currencies in international trade. “Why can’t we do trade based on our own currencies?” he said, adding, “Who was it that decided that the dollar was the currency after the disappearance of the gold standard?”

But it’s easier said than done

However, realising this dream is complicated and there are several roadblocks to it. There have been disagreements on payment mechanisms, types of currency to be used and how to implement the infrastructure. Security concerns also have to be negotiated.

Some of Brics’ members — namely Russia and Iran — face sanctions from the West, which makes the cross-border payments system for trade even more complicated. Some member countries’ central bank systems remain unprepared for cross-border integration, and the presence of several nonconvertible currencies further complicate the process.

As Hugh Thomas, lead analyst of commercial and enterprise at Javelin Strategy & Research, noted, “There’s no real governing body between them they could use to build an infrastructure to replace Swift and dollar-denominated transactions. Add to that you’d basically have China running the show, and the fact that building shared infrastructure with Russia raises a lot of red flags with the US, and the case becomes questionable.”

Sources have also told Bloomberg that the recent expansion of Brics — it has increased its membership to include Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.

Trump’s push back on Brics

The move by Brics to go ahead with its cross-border payments initiative has earned the ire of US President Donald Trump . In a post on Truth Social, the US president wrote, “Any country aligning themselves with the anti-American policies of Brics, will be charged an additional 10 per cent tariff. There will be no exceptions to this policy. Thank you for your attention to this matter!”

This threat follows the one he had issued in February in which he warned that Brics nations would face “100% tariffs” if they attempted to undermine the role of the US dollar in global trade.

However, Brazilian leader has hit back at the American leader, saying the world “doesn’t need an emperor”.

At the end of the Brics summit, Lula struck a defiant tone when asked by reporters about Trump’s tariff threat, “The world has changed. We don’t want an emperor.”

“This is a set of countries that wants to find another way of organising the world from the economic perspective,” he said of the bloc, adding, “I think that’s why the Brics are making people uncomfortable.”

He also asserted that global trade didn’t need to solely rely on the US dollar. “The world needs to find a way that our trade relations don’t have to pass through the dollar,” Lula told journalists.

With inputs from agencies