Beyond the greenback: How Brics is engineering a multipolar cross-border financial system

India is gearing up to host the 18th Brics Summit this week.

But while the preparations and convoy rehearsals are underway in the national capital, across financial hubs throughout the Global South, an unprecedented structural transformation of international trade settlement is quietly gaining momentum.

The Brics alliance — which expanded beyond its founding members of Brazil, Russia, India, China, and South Africa to integrate key economic powers including the United Arab Emirates, Iran, Egypt, and Ethiopia — is aggressively pursuing an independent, decentralised cross-border payment infrastructure.

What began years ago as rhetoric has evolved into a tangible policy initiative.

Fuelled by consistent volatility around the globe, the weaponisation of global clearing systems, and a universal desire to slash international transaction overheads, Brics member states are building parallel financial conduits.

These systems are designed to bypass Western-dominated messaging rails like SWIFT and reduce reliance on intermediate conversions through the United States dollar.

Rather than seeking an immediate, monolithic replacement for the dollar, the expanded grouping is constructing a modular ecosystem.

This framework integrates domestic messaging platforms, leverages distributed ledger technology (DLT), utilises central bank digital currencies (CBDCs), and expands bilateral local-currency trade agreements.

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Why is Brics exploring cross-border payments?

For decades, the global trade architecture has operated on a hub-and-spoke model centred on the US dollar and Western financial intermediaries.

While this system offered liquidity and standardied rules, it also exposed non-Western economies to significant vulnerabilities.

Financial weaponisation and sanctions risk

The primary catalyst accelerating Brics financial integration was the unprecedented scale of Western economic sanctions imposed on Russia following the escalation of the Ukraine conflict in 2022.

The disconnection of major Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), alongside the freezing of nearly $300 billion in foreign sovereign assets, sent shockwaves through central banks across the Global South.

For policymakers in Beijing, New Delhi, Brasilia, and Riyadh, these measures demonstrated that access to Western payment infrastructure is not merely a neutral utility, but a political privilege subject to unilateral revocation.

Sovereign nations recognised that complete dependence on dollar-denominated clearing networks exposed their trade security and foreign reserves to secondary sanctions and external policy shifts.

Constructing alternative payment mechanisms became a mandatory national risk management strategy.

High transaction overhead & settlement delays

A cross-border trade transaction between two emerging markets — for instance, a Brazilian soybean exporter selling to an Indian buyer — traditionally requires routing messaging through multiple intermediary correspondent banks in New York or London.

This process forces a double currency conversion: Brazilian Reais are converted into US Dollars, transferred through clearinghouses, and subsequently converted into Indian Rupees.

Each step incurs handling fees, currency conversion spreads, and compliance checks, dragging out settlement times from 24 hours to up to 5 business days while adding 2 per cent to 5 per cent in total transaction overheads.

For businesses operating on tight margins in developing markets, direct bilateral clearing offers a drastic reduction in operational drag.

Federal Reserve policy spillovers

Emerging economies have long wrestled with “dollar trap” dynamics, where domestic monetary conditions are perpetually held hostage by the monetary policy of the US Federal Reserve.

When the Federal Reserve raises interest rates to combat domestic US inflation, capital flees emerging markets toward higher-yielding US Treasuries, causing local currencies to depreciate rapidly.

Because global energy, food, and industrial commodities are predominantly priced in dollars, local currency depreciation automatically imports inflation, raising the cost of vital domestic imports.

By shifting cross-border invoicing and trade settlements into local currencies, Brics countries aim to insulate their domestic markets from exchange rate swings originating in Washington.

How will Brics cross-border payments work?

To realise a multi-currency trade environment without relying on SWIFT or US clearing corridors, Brics is pursuing a multi-layered technical architecture.

Brics Pay and DCMS

Brics Pay is an initiative spearheaded by the Brics Business Council and developed collaboratively by technology and banking experts across member states.

Unlike SWIFT, which relies on centralised messaging servers located in Western jurisdictions, Brics Pay incorporates a Decentralised Cross-border Messaging System (DCMS).

Developed originally through software research initiatives at Saint Petersburg State University alongside member IT consortia, DCMS functions on an encrypted, distributed node model.

Participating central and commercial banks run independent nodes within their own territories. Key operational principles include:

Interconnecting national financial rails

Over the past decade, Brics nations have built robust internal instant-payment networks and sovereign messaging systems:

Through standardised Application Programming Interfaces (APIs) and secure cross-border gateways, Brics Pay acts as an interoperable translation layer.

An Indian importer using RuPay or SFMS can transmit payment instructions that translate seamlessly through Brics Pay into CIPS or SPFS, allowing the foreign exporter to receive funds directly in their domestic network without ever interacting with a US clearing bank.

Central Bank Digital Currencies (CBDCs) and Project mBridge

Digital currency innovation plays a fundamental role in the long-term Brics financial vision. China’s e-CNY (Digital Yuan) and India’s Digital Rupee represent two of the world’s most advanced sovereign CBDC projects.

Along with these, multi-CBDC platforms such as Project mBridge — developed in partnership with central banks in China, the UAE, Thailand, and Hong Kong alongside the Bank for International Settlements (BIS) Innovation Hub — have demonstrated the feasibility of real-time cross-border settlements.

Under a multi-CBDC cross-border setup, central banks issue digital versions of their sovereign currencies directly onto a shared distributed ledger.

Cross-border payments are executed via “atomic settlement” — meaning payment and delivery occur simultaneously in seconds, eliminating credit risk, settlement delay, and intermediate currency conversion costs.

The “Unit” proposal

To address trade imbalances without forcing members to hold large balances of each other’s national fiat currencies, financial theorists within Brics have explored a synthetic unit of account, widely discussed under the name “Unit.”

Unlike a common currency like the Euro — which required member states to surrender national monetary policy and independent central banks — the “Unit” is conceptualised strictly as a non-circulating benchmark for trade accounting.

Proposed to be backed partially by gold reserves (40 per cent) and a weighted basket of member currencies (60 per cent), the Unit would serve as a neutral pricing mechanism to balance bilateral trade surplus and deficit accounts across member state central banks.

How are Brics members settling in local currency bilaterally?

The transition toward alternative payment mechanisms is not merely theoretical, it is already reflected in massive volumes of bilateral trade across the expanded Brics bloc.

China and Russia

The China-Russia trade corridor represents the most complete implementation of non-dollar clearing. Facing total severance from Western capital markets, Russia rapidly reoriented its external trade toward China.

By late 2024 and continuing through 2026, over 90 per cent of all bilateral trade transactions between Beijing and Moscow — encompassing energy supplies, industrial machinery, electronics, and consumer goods — have been conducted directly in Chinese Yuan and Russian Roubles.

Chinese commercial banks and Russian counterparties rely directly on CIPS and SPFS messaging channels, rendering their $240+ billion trade volume virtually immune to Western financial sanctions or SWIFT disconnections.

India and Russia

Following 2022, India dramatically scaled up imports of discounted Russian crude oil, quickly making Moscow one of New Delhi’s top energy suppliers.

To facilitate this trade without violating Western price caps or risking sanctions on Indian financial institutions, India and Russia utilised special Rupee Vostro account mechanisms under the Reserve Bank of India’s (RBI) Rupee Settlement Framework.

Indian oil refiners paid for Russian crude in Indian Rupees deposited into designated accounts in Indian banks held by Russian institutions.

However, this bilateral setup exposed a significant structural limitation: trade asymmetry.

Because India imported vast quantities of Russian energy while exporting a much smaller volume of pharmaceuticals, agricultural products, and machinery back to Russia, Russian exporters accumulated billions of dollars worth of Indian Rupees in Indian banks.

Because the rupee is not fully convertible on the capital account, Russian institutions faced difficulties repatriating or spending these funds internationally. To resolve the deadlock, trade clearing diversified into non-dollar third-party currencies, including the UAE Dirham (AED) and Chinese Yuan, alongside investments of surplus rupees directly into Indian infrastructure bonds and equity markets.

This experience highlighted to Brics leaders that simple local-currency billing is insufficient without broader, multi-currency netting mechanisms.

India and the UAE

In July 2023, the Reserve Bank of India and the Central Bank of the UAE established a bilateral Local Currency Settlement System (LCSS) to facilitate direct Rupee-Dirham transactions.

The framework allows Indian gold and jewellery importers and UAE oil and gas exporters to settle contracts directly through domestic accounts without intermediate US dollar clearing.

India has also linked its UPI network directly with the UAE’s Instant Payment Platform (AANI), enabling seamless cross-border retail remittances for millions of Indian expatriates working in the Gulf.

Brazil and China

Brazil under President Luiz Inácio Lula da Silva has been an outspoken advocate for monetary independence.

Brazil and China have established a formal framework allowing major commodity transactions — such as Brazilian exports of soybeans, iron ore, and pulp — to be invoiced and settled directly in Chinese Yuan or Brazilian Reais.

The Industrial and Commercial Bank of China (ICBC) established a dedicated clearing bank in Brazil, providing liquidity and direct foreign exchange clearing to Latin American businesses trading with Asia.

Is this a step towards total de-dollarisation?

A frequent misconception is that the Brics cross-border payment initiative represents a coordinated, ideological attempt to destroy or immediately replace the US dollar as the world’s reserve currency.

However, the reality is that Brics is seeking financial resilience, diversification, and autonomy, rather than a single-currency global coup.

The US dollar continues to maintain a dominant position in the hierarchy. According to data from the International Monetary Fund (IMF) and the Bank for International Settlements (BIS), the US dollar still accounts for approximately 58 per cent of global foreign exchange reserves, over 85 per cent of foreign exchange transactions, and roughly half of all global trade invoicing.

No single Brics currency currently offers the combination of open capital flows, deep liquidity, and legal predictability that the US dollar does, for now.

The primary goal of the Brics payment architecture is to build a backup rail — a parallel financial infrastructure that can function reliably alongside the existing Western system.

Policymakers within the bloc recognise that total abandonment of the dollar is neither feasible nor desirable in the near term. Countries like India, Brazil, South Africa, and the UAE maintain extensive commercial and strategic partnerships with the United States and Europe.

Their objective is not to isolate themselves from Western financial markets, but to ensure that their national economies cannot be paralysed by unilateral foreign policy actions originating in Western capitals.

India’s stance illustrates this internal nuance. New Delhi strongly supports local currency settlement, UPI integration, and lowering transaction costs for its exporters. However, India has firmly resisted any initiative that seeks to create an anti-Western geopolitical front or replace US dollar dominance with Chinese Renminbi dominance.

Indian economic leadership explicitly distinguishes between non-dollar trade and anti-dollar agendas. India favours a multi-currency world order where the Rupee, Dirham, Real, and Yuan coexist with the Dollar and Euro, giving developing countries maximum financial choice.

What challenges does Brics cross-border payments face?

While the strategic rationale for Brics cross-border payments is compelling, scaling these alternative mechanisms across dozens of diverse economies presents massive hurdles.

Capital account restrictions & currency convertibility

The most formidable barrier to widespread adoption of local-currency settlement is the lack of full capital account convertibility among key member currencies. Neither China’s Renminbi nor India’s Rupee is freely convertible in the manner of the US dollar, Euro, or Japanese Yen.

Both Beijing and New Delhi maintain capital controls to protect their domestic financial systems from speculative capital flight and exchange rate volatility.

When foreign exporters receive non-convertible or restricted currencies in trade, they cannot freely convert those funds into other assets or repatriate them without regulatory approvals.

Until major Brics economies liberalise capital controls — a step that carries significant domestic macroeconomic risks — their currencies cannot fully function as friction-free global mediums of exchange.

Trade asymmetries and accumulated surplus balances

Bilateral trade between nations is rarely balanced. When Country A exports significantly more goods to Country B than it imports in return, direct local currency settlement creates an accumulation problem.

As seen in the India-Russia crude oil trade, receiving payment in a non-convertible currency without a corresponding volume of goods to buy in return leaves foreign central banks and corporations holding “trapped” liquidity.

Without a robust, multi-lateral clearing house that allows Country A to spend Country B’s currency in Country C, bilateral currency clearing hits natural structural limits.

Distrust and regional rivalries

Economic integration requires high levels of strategic trust among central banks and regulatory authorities. However, Brics encompasses nations with distinct geopolitical interests and active border disputes, most notably India and China.

Concerns over Chinese economic statecraft cause neighbouring members to approach China-led financial platforms like CIPS with measured caution, ensuring they do not exchange reliance on New York for reliance on Beijing.

Building a truly shared, neutral clearing architecture requires establishing complex governance frameworks that prevent any single member from asserting disproportionate control.

Regulatory alignment, cybersecurity, and Anti-Money Laundering (AML)

Connecting disparate national payment systems requires reconciling fundamentally different regulatory, legal, and compliance environments.

Standardising Know-Your-Customer (KYC) requirements, Anti-Money Laundering (AML) checks, and Countering the Financing of Terrorism (CFT) protocols across expanded Brics+ members is a huge undertaking.

Also, building a decentralised messaging framework like DCMS demands ironclad cybersecurity standards to prevent state-sponsored cyberattacks, system disruptions, or illicit financial flows, ensuring the platform complies with global financial transparency guidelines.

Analysts project that by the early 2030s, non-dollar local currency clearing could account for 15 per cent to 20 per cent of total global trade settlements, driven predominantly by intra-Asian, intra-African, and Latin American trade corridors.

While the US dollar will undoubtedly remain a dominant anchor for global capital and reserve storage, its absolute monopoly over international transaction messaging and commodity clearing is gradually giving way.

For stakeholders, this evolving architecture requires adapting to a multi-currency reality.

Companies operating across the Global South will increasingly need the operational capacity to invoice, hedge, and settle trades across a spectrum of national currencies and digital platforms.

With inputs from agencies