The 17TH Summit of BRICS, held on 6-7 July 2025 in Rio de Janeiro, Brazil, has come and gone. Some of the issues discussed at the summit are the rise of protectionist trade practices, imposition of tariffs by the US and the fate of the Dollar as a global reserve currency. Many of the BRICS members advocated the removal of the dollar from its “exorbitant privilege” global position and recommended a multipolar financial system. To all the advocacies and calls for its replacement, the Dollar seem to be muttering like Mark Twain; “the reports of my death are greatly exaggerated”, “my head may be bloody but it is unbowed.”
The decision to make the American Dollar, the world’s reserve currency was taken in 1944, when 700 representatives of 44 nations met in Mount Washington Hotel in Bretton Woods, New Hampshire, US to fashion out a post-World War 11 economic order. This decision was based on the fact that the United States was undisputably the most powerful and strongest economic power in the world holding two-thirds of the global gold reserve. Since then, the dollar also known as the greenback has served as a good, liquid, trusted, reliable and efficient global reserve currency driving world trades, businesses and wealth distribution. A currency is as strong as its country’s economy and politics. A currency symbolizes the reputation of its country. For a currency to serve as a global currency, it requires to have three characteristics namely, reliability, credibility and transparency. The Dollar has all these. The politics of a country can affect the perception and the confidence on its currency. The US in its desire to assert itself and discipline countries that pose as threats to global peace and economic order has imposed sanctions on many nations. The most prominent was the imposition of economic sanctions on Russia in 2022 at the outbreak of the Russia-Ukraine war. The Russian foreign exchanges reserve and investments in the West to the tune of 300 billion dollars were seized and the country was ejected from the global SWIFT payment systems. Western countries, US and Europe placed embargo on the importation of Russian oil and gas. These measures disrupted the economy of Russia. Equally, sanctions were imposed on Iran. These sanctions raised the fears of many countries to the risks and their vulnerabilities in investing and holding dollar assets. The recent imposition of tariffs by President Trump, its consequent heightening of uncertainty in the global economy and the concomitant adverse effects on the dollar vice -verse the US bond and stock markets have raised the agitations for an alternative to the Dollar as global reserve currency. Before the events of the Liberation Day of 2nd April, 2025, there has been moves, realignments, calls, global coalitions, agitations, campaigns to seek an alternative and escape the dominance of the Dollar in what can be termed the Dedollarisation campaign. What are the alternatives to the Dollar.
The first is the Euro. The Euro is a widely acceptable currency. However, the Euro has certain drawbacks that will prevent it from serving as a global reserve currency. The Euro is not liquid. The Euro has no core foundational government to rely on. It relies on a number of governments in Europe.
The second currency that has the potential to serve as a global reserve currency is the Chinese Yuan/Renminbi. However, the Yuan has major drawbacks. China does not have a transparent economy, the operations in its economy are opaque. Equally, China does not have a transparently developed capital market, its disclosures are not explicit. The People’s Bank of China maintains stability and financial security in the Chinese financial system by the use of capital controls. This guides how much foreign money can move into and out Chinese economy. This action impacts on the foreign currency exchange rate. The implication is that China can never liberalize its current account. How can China pursue the internationalization of the yuan. What China can do and is currently doing is to exert its spheres of currency influence among its trading partners. This is what she does with her BRICS partners.
India is pursuing Russian oil in UAE dirham or roubles. China switched to yuan to buy some $88Billion worth of Russian oil, coal and metals. Chinese national oil company CNOOC and France’ TotalEnergies completed their first yuan settled LNG trade.
The third is the expected BRICS bloc currency which they have announced will be issued in 2026. The world is still buoyed by the sentiments and the euphoria of the sheer size of the population and economic proportion of the BRICS bloc. There is no empirical evidence to show that multi-country currencies have done well to serve as global reserve currencies. On the contrary, such currencies face challenges such as illiquidity, differing economic policies, the risk of potential failure during economic depression and dominance of larger economies over smaller ones. The fate of such countries like Greece, Spain etc under Euro currency is an example. The reality will dawn on us when the BRICS currency is issued.
For a currency to be a global reserve currency, it comes at a cost to its country. The country will be compelled to run a current account deficit. This is the fate of United States with the Dollar. There are more global demands for the US Dollar than the US requires to meet its imports and other transactions. This makes the US to grapple with greater deficit in order to satisfy the global demand for Dollars. This explains the reason for the persistent current account deficits in US. Being the issuer of the global reserve currency, the US is under obligation to run a bloated budget and persistent current account deficit. As the global trade expands, the demand for Dollar increases. These demands can only be satisfied or supplied to meet global demand by US running a current account deficit and backing it by issuing denominated instruments to finance it. This leaves the US economy vulnerable to unexpected shifts/shocks in global capital flows. It is only the US economy in the world that has the capacity, robustness, political will, vibrancy to absorb and contain such economic shocks. China with its buoyancy does not have the political will and economic robustness to do so except it restructures its economy to run a sustainable current account deficit to enable it to supply a steady and sufficient flow of Yuan to the world. Many advocates for Yuan as an alternative global reserve currency do not know that China does not want its Yuan as a global reserve currency with its attendant global disclosures, exposures to capital flow shocks and its transparency codes.
According to IMF’S currency composition of official foreign exchange reserve (COFER) data, the dollar’s share of global reserves at the fourth quarter of 2024 was 57.3%. Euro was 20.03% and Chinese Yuan is 2.18%. Figures released by Bank of International Statement triennial survey of foreign exchange, 2022 show that the dollar accounted for 88% of global foreign exchange trades. On the other hand, although transactions involving the yuan has gone up by 70% in the last three years, yet the Yuan only accounted for 7% of total international transactions.
Commodities producers and traders can accept to trade with China but converting cash to Chinese bonds remain difficult because of the challenges of opening accounts and regulatory uncertainties in China.
The big size of the US economy as well as other essential elements of the economy such as trust in an asset as a store of value, the quality, size and depth of investible financial instruments available to investors, the rating of its capital market, the ease of doing business in US, the ease of accessing capital in US, the ease of its convertibility, the highly liquid state of US dollar and its global circulation are factors that favour the Dollar’s dominance.
According to Bank of International Statement, the dollar-denominated credits to the non-banks outside the US amounted to $12.8 Trillion in 2022 which accounts for 60% of foreign currency debt holding. No currency has up to 2-3% share in foreign currency debt issuance.
The big size of the US treasury which is about $28Trillion is seen as a safe haven for money. Its depth, liquidity and safety are the reason for US dollar dominance of the reserve currency market. In times of economic uncertainty and financial market volatility such as this period we are now in the world, the dollar strengthens due to its safe haven appeal. The downside of this is that it increases the cost of financing dollar-denominated debt instrument. In the last few months, the relationship between the US dollar and interest rates seem to be reversing. Historically, increasing bond yields have always been backed by a stronger dollar while falling yields have led to a weaker dollar. Beginning from March 2025 until June, 2025, the market has witnessed risen bond yields despite the fact that the dollar has lost about 6% to the Euro. This scenario seems to infer that the global financial market seems to be repricing the premium on holding the dollar and expecting higher returns.
America’s attractiveness to immigrants account for its continued prosperity and dominance. According to Migration Policy Institute and Pew Research Centre, it is estimated that 4.78 million immigrants migrated to USA in 2023. The top countries of origin of these immigrants are Mexico, India and China. About 80% of these immigrants especially from India are highly educated, IT savvy, and in the active working age group. In 2024/25, China has about 1,390 students in Harvard University which represents 20.5% of foreign students in Harvard. In 2023/24, about 277,000 Chinese enrolled in US Universities. This is even a decline from the pre-COVID figures. In 2023/24, about 331,602 students from India were studying in American Universities. Assuming these students pay $60,000 per annum. This will amount to staggering billions of Dollars to the American economy.
From statistics, about 90% of these students would want to live in US permanently after their studies. A number of these students and other immigrants are youths. These graduates key into the robust American work ethics to contribute to the prosperity of US. This gives the US a demographic edge ensuring that it has a massive pool of resourceful manpower and buoyant domestic consumption. The American economy thrives on the capacity of its aggregate domestic consumption with private consumption representing 70% of the GDP. America is like bees to honey. It attracts talents, resourceful human capital. People love America not just for its wealth but for its liberal economy, the American dream that you can aspire and achieve your dream no matter your race lures people to US. The American economy also benefits from tourism. The tourism includes leisure, business, medical and educational tourism. In 2023, the travel and tourism contributed $2.36Trillion to the US economy. This accounts for 8% of the GDP.
The American financial system is very dynamic, robust and it nurtures entrepreneurial culture. The American Universities are intellectual powerhouses for excellence in science, humanities, innovation and technological breakthroughs that drive the global economy. The Silicon Valley companies like Facebook, Meta, Cisco and many others drive entrepreneurship. The top 9 to 10 global hedge funds are American. On 9th July, 2025, NVIDIA, an American technology company became the first company to achieve a valuation of 4Trillion Dollars. Microsoft, another American company achieved the same feat in valuation on 31st July, 2025. Over twenty American companies have over $1Trillion net cash balance sheet. About 54% of Unicorns are American companies. All these boost the strength of the Dollar.
However, there are challenges to the Dollar’s dominance.
The energy commodities are now being transacted in non-dollar currencies. Russian oil and other commodities are being sold eastward and southward in alternative non-dollar currencies. China, Russia, India, Brazil and Turkey are in the forefront in these transactions.
On the other hand, the Central Banks have ramped up on their purchase of Gold as a safe haven and a way of diversifying from dollar dominance. JP Morgan research team estimates that Central Banks bought about 1,136Tonnes of Gold in 2022. By Q2, 2025, Central Banks purchased 166Tonnes of Gold and this comes to 41% increase above the normal transaction level. The World Gold Council reported that Central Banks now hold 36,000 tonnes of Gold.
There is equally the threat of the BRICS currency expected to be issued by 2026. Already, samples of BRICS currency are already being showcased. Judging from the Euro experience, currencies floated by multiple countries are normally susceptible to differing economic policies, risk of collapse during economic recessions and the dominance of larger economies over smaller ones. The excitement over the issuance of the BRICS currency with opaque economies such as Russia and China might not achieve the toppling of the Dollar as the global reserve currency. My prediction is that countries like India and Brazil that run more transparent economies will suffer a negative outcome with the BRICS currency.
The most challenging threat to Dollar dominance is the fast rate at which new payment systems are evolving, which facilitate cross-border trade without passing the US banks. An example is the Project m Bridge, which is a multi-Central Bank digital currency (CBDC) which connects central and commercial banks across China, Hong Kong, Thailand, the UAE and Saudi Arabia, which does not depend on the Dollar.
According to Joyce Chang, Chair, Global Research, JP Morgan, “While we are far from a multipolar financial system, China continues to dominate the e-commerce market raising concerns about a global digital divide. The global e-commerce was sized at around in $5.8Trillion in 2023 with China accounting for around half the pie. Correspondingly, China’s digital payments market, which is largely off limits to foreign payment networks is expected to grow 10% annually.”
However, Prof Kenneth Rogoff in his book, Our Dollar, Your Problem, did advise his countrymen. “Much of the Dollar’s role comes from our reputation for good, stable, predictable policy, from the Fed’s independence from political pressures, from our trustworthiness as the world’s superpower. You can’t trash all that and expect the Dollar to be unaffected.”
In all these, the elements that sustain and support the dominance of the dollar as a global reserve currency are well entrenched and structural in form. Despite the challenges, the BRICS currency may pose, the American Dollar will remain the dominant global reserve currency in the foreseeable future. American Dollar remains a safe haven, a store of value and the global crown jewel of currencies. Equally, the American economy despite its present challenges, will remain unarguably the most robust and viably most developed economy in the world.
. Dr Umunnaehila is a Chartered Stockbroker, a commodities broker, a Financial, Economic and Management Consultant who holds a Ph.D in Business Administration from Babcock University, Nigeria. He is the CEO, AllwellBrown Consulting Ltd, an author, a seasoned scholar and Investment trainer. He is also a Fellow of Chartered Institute of Stockbrokers (CIS), Member, Chartered Institute of Securities and Investment (CISI), Member, Capital Market Academics (CMA) and a licensed Securities Dealer with Securities and Exchange Commission, Nigeria. He can be reached on [email protected]
