De-Dollarization: What It Is & How to Prepare If It Happens

Due to higher interest rates and the increased strength of the U.S. dollar, countries are looking for greater financial autonomy by reducing their reliance on the currency for trade and reserves.

BRICS nations (Brazil, Russia, India, China, and South Africa) along with others like Iran and Saudi Arabia, are leading efforts to use local currencies in international transactions.

This movement, known as de-dollarization, challenges the dollar’s dominance and would cause a massive shake-up in the global economy. 

This guide explains what de-dollarization is, the key drivers causing it, its potential economic impacts, benefits, and more.

What is de-dollarization?

De-dollarization is the deliberate move by countries to reduce their dependence on the U.S. dollar for international trade, financial transactions, and reserve holdings. 

It challenges the dollar’s long-standing role as the world’s dominant currency, which powers everything from oil deals to central bank vaults.

The dollar became the world’s dominant currency with the 1944 Bretton Woods Agreement, when global currencies were tied to it and backed by gold.

Even after the gold standard ended in 1971, the dollar held strong. 

Today, the U.S. dollar accounts for approximately 58% of global foreign exchange (FX) reserves, ranging from $6.5 to $7 trillion in total.

The next closest currency, after the US dollar, is the Euro at 20%. Nearly 90% of foreign exchange transactions involved the US dollar in 2024. 

However, the dollar’s dominance has decreased significantly over time. In 2016, the US dollar accounted for 65.36% of the world’s foreign exchange reserves.

There are additional signs the dollar is weakening. Some reasons driving this include: 

• Geopolitical friction: U.S. sanctions on countries like Russia, Iran, and Venezuela have led these nations to search for alternatives. For instance, Russia now conducts 90% of its trade with China in yuan or rubles to bypass dollar-based systems.
• Economic shifts: China is pushing the yuan globally through the Belt and Road Initiative, while India promotes Rupee trade. BRICS nations are exploring non-dollar options, including gold-backed systems.
• U.S. policy impact: Federal Reserve decisions, such as rate hikes, are causing uncertainty and prompting countries to find independence from dollar-driven volatility.

De-dollarization doesn’t mean the dollar’s done. It’s still the dominant currency, with by far the largest market share in reserves and currency volume. 

But countries are diversifying. Local-currency trade agreements, non-dollar payment systems, and alternative reserves signal a gradual move toward a multipolar economic order.

Countries Involved in De-Dollarization

Several nations are actively pursuing de-dollarization to reduce reliance on the U.S. dollar in trade and reserves.

The push is led by geopolitical tensions and economic motives that are friendlier to each country’s interests.

BRICS countries are at the forefront of de-dollarization alongside others facing U.S. sanctions or seeking greater financial autonomy.

Here’s a look at the primary countries involved in de-dollarization efforts.

China

China, the world’s second-largest economy, is aggressively promoting the Yuan to challenge the dollar’s dominance.

In 2023, China surpassed the dollar in its own cross-border payments, with the Yuan accounting for 48.4% of its international transactions.

Through the Belt and Road Initiative, Chinese BRI engagement reached a record $121.8 billion across 340 deals in 2024.

That represents a 31% increase from 2023. China’s push to rely less on the dollar for international transactions positions it as a leader in de-dollarization.

Russia

Russia, hit by Western sanctions since its 2022 invasion of Ukraine, has sharply accelerated de-dollarization. It mandates ruble payments for gas exports to “unfriendly” countries.

On top of that, Russia’s central bank increased its gold reserves by 34.6 tons, bringing the total to 2,350 tons by the end of the year (highest since March 2000).

Their non-dollar assets, including gold and other currencies, make up approximately 23.61% of total reserves. 

These steps, paired with Russia’s role in BRICS, reflect their push for financial autonomy away from the USD.

India

India is promoting the rupee for global trade to stabilize its currency and reduce exposure to U.S. monetary policy.

At the end of 2023, approximately 90% of trade between India and Russia was conducted using rupees or rubles, up from 20% in 2021.

While India has clarified that it does not support the creation of a common BRICS currency, the country is still increasing efforts to use local currencies in trade to reduce reliance on the U.S. dollar.

Brazil

In 2023, Brazil and China executed their first bilateral trade transaction entirely in local currencies without involving the U.S. dollar.

Additionally, Brazil’s instant payment system, Pix, has become the primary way the country promotes domestic digital transactions.

President Lula da Silva has advocated for a BRICS currency basket to reduce dependence on the dollar, although no formal plans have been established.

Iran

Iran and Russia connected their national financial messaging systems (SEPAM and SPFS) in 2023, enabling direct interbank transactions. This allows both countries to bypass the SWIFT system.

In addition, Iran has stopped using the U.S. dollar in trade with Russia and only uses the Russian ruble instead.

Iran has also stated it supports a unified BRICS currency.

Saudi Arabia

Saudi Arabia has been a nation that seems to be playing both sides in the de-dollarization debate. While they have shown interest in conducting oil trade in Yuan and joining BRICS, neither has happened yet.

But the country’s consideration of non-dollar trade is something to monitor in the future.

South Africa

South Africa supports local-currency trade and reserve diversification within BRICS. The country increased its gold reserves to $11.315 billion as of January 2025.

South Africa has also pushed for BRICS payment systems, such as BRICS Pay, to reduce the use of dollars in intra-bloc trade.

Economic Effects of De-Dollarization

According to the latest data, around 90% of oil trades are denominated in dollars. An immediate effect of de-dollarization would be commodities like oil priced in Yuan or Euros.

This would likely increase exchange rate volatility, raising trade costs by 2–3% for non-dollar transactions.

A stronger dollar due to Federal Reserve rate hikes in 2023–2024 made dollar loans more expensive. This pushed firms to cheaper Yuan-based financing, with RMB trade financing up 30% in Asia. 

Another effect would be in local currency trade agreements. As we discussed, Brazil and China struck a $150 billion Yuan-Real deal in 2023.

Announcements like these could boost intra-regional trade by 5–10% in BRICS and in ASEAN regions. 

Not only does de-dollarization impact the global economy, but it could also cause dollar depreciation.

J.P. Morgan estimates a sustained move away from the dollar could lower its value by 10–15% due to a drop in demand for dollar reserves. 

This would also lead to higher borrowing costs for the United States. Today, the U.S. benefits from low borrowing due to dollar demand.

De-dollarization could raise yields on U.S. bonds by 0.5–1%, increasing federal debt servicing costs by $50 billion yearly.

How to Prepare for De-Dollarization

There’s no reason to panic, at least in the near future, about de-dollarization. But there’s nothing wrong with being prepared for this trend.

There are proactive measures that individuals can take to mitigate risks and capitalize on opportunities. 

As mentioned, the dollar’s grip is loosening, as its share of global foreign exchange reserves has fallen to 57%.

To protect yourself, consider spreading your savings across stable currencies to mitigate risks from fluctuations in the dollar. 

The euro, for instance, makes up a large portion of global reserves and remains relatively stable.

Gold is another option. Central banks have been increasing their gold reserves, adding 1,045 tons in 2024.

While riskier, you could also consider cryptocurrencies. Bitcoin is a highly volatile asset, but over time has served as a profitable alternative store of value. 

Building a small cash reserve in multiple currencies can also provide flexibility if dollar fluctuations hit your purchasing power.

How serious is de-dollarization? Should you be worried?

De-dollarization is real—but it’s a slow shift, not a sudden crisis. The U.S. dollar still dominates and powers the largest portion of SWIFT transactions.

Oil also remains priced overwhelmingly in dollars. Still, momentum is building. BRICS nations are ramping up local-currency deals, and gold buying hit 1,037 tons in 2024 as a hedge.

So, should you worry? Not yet.

The dollar’s deep markets and global trust give it staying power. But if you’re heavily dollar-exposed, inflation and purchasing power could take a hit over time.

Building a diversified portfolio is the best way to remain flexible and reduce your risks.

Are there any benefits of de-dollarization?

If you were to ask the United States government, I’m sure the answer would be a resounding ‘NO’.

However, there are some potential benefits of de-dollarization for the rest of the world.

First, it can increase economic sovereignty, letting countries trade without being exposed to U.S. interest rates, sanctions, or dollar shortages.

It can also lower transaction costs in bilateral trade, stabilize local currencies, and reduce dependence on U.S. monetary policy.

For nations holding large dollar debts, shifting toward gold or other currencies can diversify reserves and improve financial resilience.

If it were to happen, it would create a more balanced, multipolar financial system. However, it could also reshape the global economy and lead to increased exchange rate volatility.