De-Dollarisation

This article sheds light on the rebalancing of global finance after sanctions on Russia.

The weaponisation of the U.S. dollar after Russia’s 2022 invasion of Ukraine has shaken confidence in the global financial system. Western sanctions have frozen nearly $300 billion of Russia’s foreign reserves and cut major banks from the SWIFT messaging system (Reuters, 2023). For many governments, especially those outside the NATO bloc, this signalled the risk of over-reliance on the dollar-centric system, and the possibility of this being used as a weapon of soft power against those who don’t bend the knee to an increasingly assertive United States (US). Therefore, countries from China to Brazil are now experimenting with alternative currencies, gold accumulation, and digital payment systems.

This trend, often termed as “de-dollarisation”, does not yet dismantle the dollar’s dominance. However, it is reshaping the global finance landscape by creating new linkages and rival payment infrastructures. The era we find ourselves in today opens the possibility of a more fragmented, multipolar monetary order.

Sanctions and the Shock to the Dollar System

For decades, the U.S. dollar (USD) has served as the world’s primary reserve currency. In the share of global foreign exchange reserves, the USD constitutes 53.6% of all transactions, more than double the Euro (EUR), comprising 18.6% (Statistica, 2022). In a similar vein, the USD constitutes 50.2% of payments worldwide (Nazarenko, V. 2025) and 89.9% of foreign exchange transactions. Therefore, this illustrates the dollar’s pivotal role in underpinning trade invoicing, commodity pricing, and cross-border lending. This gives U.S. markets a unique depth and liquidity unmatched by other currencies.

The West’s financial sanctions on Russia were unprecedented in scope and coordination. Moreover, by freezing reserves and banning access to Western payment infrastructure, Washington and its allies demonstrated how financial interdependence can be used as an instrument of soft power. Consequently, this influenced renewed efforts by non-Western states to diversify reserve holdings and payment channels to minimise potential exposure.

Rise of Yuan-Based Trade

China has positioned its currency, the renminbi (RMB), as an alternative to the US dollar in trade settlements. In 2025, more than 54 per cent of China’s cross-border transactions were settled in RMB, up from approximately 15% in January 2017, and from close to 0% in 2010, China’s growing shift away from the dollar (2025). This highlights China’s increasing pivot to internationalise the RMB and reduce reliance on the US dollar in cross-border financial flows, reflecting both strategic policy shifts and broader geopolitical trends.  

Beijing has brokered currency-swap agreements with over 30 central banks, including those of the United Kingdom (UK), the European Central Bank (ECB), and Canada (PBC, 2025). Russia and China now settle most bilateral trade in yuan or rubles, and a growing number of oil-exporting states have considered yuan invoicing for energy sales. To further support RMB liquidity and usage abroad, the People’s Bank of China has expanded its network of offshore clearing banks, strengthening the infrastructure for cross-border RMB transactions.

Gold Reserves as a Hedge

Central banks, especially in emerging markets, are increasing their gold holdings as a hedge against currency risk and potential sanctions. The World Gold Council’s 2024 report supports this viewpoint, with total gold demand reaching a record annual total of 4,974 tonnes and the price at an all-time high of £2600 per troy ounce in September 2025 (World Gold Council, 2024).

Türkiye, India, and several Gulf states have diversified into gold, partly in response to geopolitical uncertainty. Gold offers liquidity, near-universal acceptance, and insulation from Western financial controls, although it cannot replace the dollar’s depth in capital markets. This bullion accumulation reflects a desire to maintain assets beyond the reach of Western legal jurisdictions. Even European central banks have quietly halted net sales of gold, recognising its value as a sanctions-proof reserve.

Digital Currencies and Alternative Payment Systems

In parallel, governments are experimenting with central bank digital currencies (CBDCs) and new payment platforms. China’s e-CNY pilot now covers millions of users across multiple cities and includes cross-border tests with Hong Kong and the UAE. The Bank for International Settlements (BIS) has also supported multi-CBDC experiments such as Project mBridge, aimed at facilitating instant settlement between different authorities.

Russia has developed its own System for Transfer of Financial Messages (SPFS) messaging system as an alternative to SWIFT, while India promotes the RuPay network and Unified Payments Interface (UPI) abroad. Brazil’s PIX instant-payment system has attracted interest from neighbouring states. These initiatives remain fragmented but collectively signal a trend toward pluralisation of payment networks, where no single country or currency dominates.

Limits and Geopolitical Implications of De-Dollarisation

Despite rising experimentation, the U.S. dollar retains formidable advantages: deep and liquid capital markets, a reputation for legal predictability, and entrenched network effects. Commodity benchmarks, corporate balance sheets, and global debt remain dollar-centric. The sheer scale of U.S. financial markets means that no other currency yet matches its safe-haven appeal in crises.

This reality places boundaries on de-dollarisation. What is unfolding is better described as diversification rather than wholesale exodus from the world’s dominant currency since 1945. Yet diversification has geopolitical consequences. Multiple payment systems and reserve options could make sanctions less effective and reduce Western leverage over targeted states. New currency blocs or digital-payment alliances may emerge around major regional powers, increasing financial multipolarity. For example, a yuan-centred settlement network spanning parts of Asia, Africa, and Latin America could coexist alongside a dollar-based system in Europe and North America.

The trend also places pressure on Washington. Maintaining dollar leadership will require not only careful use of sanctions but also domestic fiscal stability, open capital markets, and regulatory predictability — factors that underpin global confidence in the dollar’s role. Overuse of financial coercion without corresponding reforms risks accelerating the very fragmentation U.S. policymakers hope to avoid. This risk has been amplified under Trump’s administration, where aggressive tariffs, fiscal expansion, and unpredictable monetary signals have eroded investor confidence and triggered a historic decline in the dollar’s value.

Conclusion

The Ukraine war, amongst other actors, has accelerated a slow but significant trend away from singular reliance on the U.S. dollar. Renminbi-based trade, gold accumulation, and digital payment systems collectively mark a diversification of global finance. While the dollar’s dominance remains intact, the psychological shift is clear: states no longer take its primacy for granted.

For policymakers worldwide, the challenge will be to manage this new pluralism without destabilising the global financial system. A multipolar monetary order could offer resilience and choice, but it also risks incompatibility, reduced transparency, and fragmented liquidity. How governments adapt — and how they use financial power — will shape the next era of economic influence.

Bibliography

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• People’s Bank of China (PBOC). 2023. Cross-Border RMB Settlement Statistics 2023. Beijing: People’s Bank of China.
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