De-Dollarization and BRICS Digital Currency: Tokenization's Geopolitical Dimension

The dollar’s status as the world’s primary reserve currency is not a neutral technical fact — it is an expression of American geopolitical power and the foundation of several critical American economic advantages. The dollar’s reserve status allows the US government to borrow at lower interest rates than it would otherwise face (other countries’ demand for dollar assets depresses Treasury yields), to run persistent current account deficits without the balance-of-payments crises that would afflict other countries, and to impose sanctions that are effective precisely because the dollar’s centrality to international trade means that sanctioned parties cannot easily operate without dollar access.

When BRICS nations — Brazil, Russia, India, China, South Africa, and now a significantly expanded membership — pursue de-dollarization, they are pursuing geopolitical independence from the United States as much as economic efficiency. The Russian sanctions following the 2022 invasion of Ukraine — which froze $300B in Russian central bank reserves and cut major Russian banks from the SWIFT interbank messaging system — demonstrated to every government with potential sanctions exposure exactly what dollar dependence costs when geopolitical relationships deteriorate. The incentive to build alternatives has never been stronger.

Tokenization — specifically, multi-CBDC platforms that allow cross-border settlement without going through dollar-correspondent-banking infrastructure — is the technological layer through which this geopolitical contest is being conducted. It is a genuinely consequential technological development in a fundamentally political contest.

BRICS Expansion and the Economic Weight of the Challenge

The BRICS grouping has expanded significantly from its original five members. Saudi Arabia, Iran, the UAE, Ethiopia, and Egypt joined in 2024, and additional countries are in accession discussions. The expanded membership covers approximately 47.9% of the global population and collectively represents a major share of global GDP, commodities production, and energy supply.

This expansion is strategically significant for de-dollarization. The Gulf countries — particularly Saudi Arabia and the UAE — are central to the petrodollar system: oil priced in dollars creates global dollar demand because every oil-importing country must acquire dollars to purchase energy. Saudi Arabia’s BRICS membership signals at minimum a willingness to consider non-dollar energy payment arrangements, which is the most consequential potential break in the petrodollar system.

For the de-dollarization agenda to succeed, it needs commodity pricing in non-dollar currencies — because commodity demand is the deepest source of structural dollar demand. Every barrel of oil traded in yuan, euros, or a basket currency reduces the quantity of dollars the world needs to hold as reserves. The expansion of BRICS to include major commodity producers creates the coalition necessary to pilot this transition.

The Unit Token: Gold-Anchored Settlement

The BRICS “Unit” token proposal, developed within the New Development Bank and BRICS financial working groups, is designed as a settlement instrument for intra-BRICS trade that is anchored to a basket of member currencies and gold. The gold anchor is politically significant: it connects the Unit to a form of reserve asset that is outside any single country’s control and that has historical credibility as a store of value independent of political relationships.

The Unit was piloted in October 2025, with a technical implementation on the Cardano blockchain — a choice that reflected several considerations including Cardano’s settlement finality properties and the desire to use infrastructure not controlled by any BRICS member nation. The pilot transaction, while small in scale, demonstrated that the technical architecture for BRICS settlement bypassing the dollar correspondent banking system was operational.

The pilot’s significance is symbolic as much as technical. A working settlement system — even one handling small transaction volumes — establishes the precedent that alternatives to the dollar system are technically feasible, that member nations are willing to use them, and that the political commitment to de-dollarization extends beyond rhetoric to operational investment.

The Unit’s path to scale is uncertain and long. Reserve currency status is built on depth, liquidity, and institutional trust that the Unit lacks — characteristics that take decades to develop. But the de-dollarization agenda is not primarily about immediately replacing the dollar with an alternative; it is about incrementally reducing dollar dependence while building alternative infrastructure that could eventually support a more multipolar monetary system.

mBridge: The Multi-CBDC Platform

Project mBridge is a multi-CBDC platform developed jointly by the central banks of China, the UAE, Hong Kong, and Thailand, with technical support from the Bank for International Settlements Innovation Hub. It is designed to allow direct settlement between central banks using their respective CBDCs, without the correspondent banking intermediation that requires dollar clearing.

The BIS’s withdrawal from mBridge in 2024 — citing concerns about the platform’s potential use for sanctions evasion — was one of the most significant signals of Western anxiety about the project. The BIS is the central bank of central banks, the institution that provides the technical infrastructure and standard-setting for the global monetary system. Its withdrawal was an explicit statement that mBridge was moving in a direction incompatible with the sanctions-enforcement architecture that the Western financial system depends on.

China’s role in mBridge is central: the digital yuan (e-CNY) is the most developed CBDC in the consortium, and China has the most immediate interest in building payment infrastructure that allows its trading partners to settle in yuan without going through the US dollar clearing system. For China, de-dollarization is simultaneously an economic objective (reducing exposure to dollar-denominated assets that can be frozen by US sanctions) and a geopolitical objective (building the infrastructure of a multipolar monetary order in which Chinese financial power rivals American financial power).

BRICS Pay and the Payment Infrastructure Layer

BRICS Pay is a lower-infrastructure complement to mBridge: a payment system designed to enable retail and commercial payments within BRICS economies without using Visa, Mastercard, or other dollar-denominated payment networks. The development of BRICS Pay draws on the individual BRICS members’ domestic payment infrastructure — Russia’s Mir, India’s UPI, China’s UnionPay — and links them into a cross-border network.

The sanctions impact on Russia has made BRICS Pay’s development urgent from Moscow’s perspective. Visa and Mastercard suspended operations in Russia following the 2022 invasion, creating immediate practical need for alternative payment infrastructure. The Russian experience has served as a demonstration to other BRICS members of the vulnerability that Western payment network dependence creates.

Trump’s 100% Tariff Threat

The Trump administration’s response to the de-dollarization agenda has been characteristically direct: the president threatened to impose 100% tariffs on any country that took steps to replace the dollar in international trade. The threat is politically powerful as a signal but faces serious enforcement questions.

The practical limits of the tariff threat are significant. The US cannot impose 100% tariffs on BRICS trade without imposing massive costs on US consumers and on supply chains that depend on BRICS-origin goods. A 100% tariff on Chinese manufactured goods, Indian pharmaceuticals, Brazilian agricultural products, and Middle Eastern energy simultaneously would be economically disruptive at a scale that constrains its credibility as a threat.

More fundamentally, the tariff threat treats the symptom rather than the cause: the de-dollarization impulse is driven by the perceived risk of dollar sanctions, not by enthusiasm for the dollar’s competitors. Threatening more sanctions-like economic measures in response to de-dollarization risks accelerating the very diversification it is meant to deter.

The US Counter-Strategy: Dollar Stablecoins as Extension

The more nuanced US counter-strategy to de-dollarization — which is embedded in the framing of the GENIUS Act on stablecoins — is to use dollar-denominated stablecoins to extend dollar dominance into the digital economy rather than to prevent the digital economy from developing alternatives.

If dollar stablecoins become the dominant digital payment instruments globally — if USDT and USDC are what most of the world uses for digital transactions — then even as traditional correspondent banking loses relevance, the dollar’s monetary dominance is preserved through private-sector digital instruments that are anchored to US monetary infrastructure and regulated under US law.

This strategy implicitly concedes that the dollar’s dominance cannot be maintained through the traditional correspondent banking system alone, and that building it into the digital layer requires welcoming private dollar stablecoin issuance rather than treating it as a threat. The GENIUS Act’s framework — requiring stablecoin reserves in US Treasury securities and US regulatory compliance for major issuers — is designed to ensure that dollar stablecoins serve this dollar-extension function.

Realistic Timelines for Meaningful De-Dollarization

The structural reality of reserve currency transition is that it operates on decade-long timescales. The dollar displaced the pound sterling as the dominant reserve currency over approximately thirty years following World War II — and that transition was supported by the most overwhelming economic and geopolitical dominance the US had ever achieved. The current US position, while challenged, is far more dominant than British power was post-1945.

The BRICS Unit, mBridge, and BRICS Pay are building the infrastructure of an alternative system that could gradually become more significant over decades. They are not building a replacement for the dollar in years. The realistic near-term scenario is marginal diversification — a modest reduction in the dollar’s share of central bank reserves, growing yuan invoicing in Chinese trade, and payment systems that give BRICS members practical alternatives to SWIFT for specific transactions.

Tokenization is an enabler of this gradual transition: it provides the technical infrastructure for multi-currency settlement at lower cost and higher speed than the traditional correspondent banking system, making the technical barriers to dollar alternatives lower than they have historically been. But technical feasibility does not determine political and economic outcomes in monetary systems, where network effects, liquidity depth, and institutional trust are the decisive factors.