As India prepares to host the BRICS summit later this year, the focus will be on a payment system linking national digital currencies. By prioritizing this infrastructure over launching a new currency, the bloc makes a pragmatic bet that practical systems will reshape global finance more than symbolic gestures.
At the summit, a crucial agenda item signals a potential shift: developing a BRICS payment system built on interoperable central bank digital currencies (CBDCs).
This infrastructure-focused initiative has drawn less attention, as it avoids the drama of calls for a ‘BRICS currency’ or overt de-dollarization. However, its avoidance of headline-grabbing moves may make it more consequential, underscoring the main argument: practical infrastructure changes can reshape finance more than symbolic challenges.
In this spirit, rather than challenging the dollar directly, the proposal focuses on a more pragmatic approach—building alternative payment rails that allow trade to be settled directly between national digital currencies, reducing reliance on the dollar-based SWIFT system.
Not a currency
A recurring misunderstanding surrounds BRICS financial cooperation. The current initiative does not seek to create a single BRICS currency, nor does it require member states to cede monetary sovereignty to a supranational authority.
Earlier proposals along those lines faltered for predictable reasons: divergent inflation regimes, incompatible capital controls, and concerns about dominance of the Chinese yuan.
The present approach moves in a different direction. It aims to link existing national CBDCs, such as India’s digital rupee, China’s digital yuan, and Russia’s digital ruble, through interoperable infrastructure. Each currency remains fully sovereign. What changes is the infrastructure that allows them to interact more efficiently.
In practical terms, this would enable cross-border payments to be settled directly in national currencies, without passing through correspondent banks or the dollar-centric SWIFT network. For participants, the appeal is clear: faster settlement, lower transaction costs, and reduced exposure to sanctions or asset freezes by Western governments.
India’s central role
India’s role is pivotal. As the summit host and agenda-setter, New Delhi has pushed CBDC interoperability from an abstract discussion to concrete policy coordination. It reflects India’s broader digital payments philosophy, shaped by the domestic success of its Unified Payments Interface (UPI): a focus on interoperability and on preserving monetary sovereignty.
The Reserve Bank of India, which plays a key role in the process, has emphasized that the digital rupee is not a crypto-asset and is not a step toward a currency union. It is a state-backed digital equivalent of cash, designed to improve efficiency while retaining policy control.
This stance explains why India has resisted proposals for a supranational BRICS currency while supporting infrastructure that makes national currencies more usable in cross-border trade.
Experience has also played a role. Earlier bilateral settlement arrangements with Russia left Moscow holding large amounts of rupees it could not easily spend, a problem known as the “rupee trap.”
That failure underscored the need for a multilateral network in which earned currencies can circulate across a broader trading bloc rather than accumulate uselessly.
Direct settlement
At the heart of the proposed new BRICS payment system are two key mechanisms designed to make trade in national currencies seamless, without relying on the dollar: settlement cycles and foreign exchange swap lines.
Settlement cycles act as a periodic netting system. Instead of forcing an immediate exchange for every single transaction, which requires constant, massive cash liquidity, all payments between two countries are accumulated over a set period. At the end of the cycle, only the net difference is settled.
For example, if Indian imports from China total ₹500 billion in a month and Chinese imports from India total ₹400 billion, only the net ₹100 billion owed by India to China needs to be transferred.
This dramatically reduces the volume of currency that must physically move, lowering costs and eliminating the risk of one country being stuck with a large, unusable surplus of another’s currency.
Forex swap lines serve as a liquidity safety net. These are pre-arranged agreements between central banks to exchange specified amounts of their currencies for a fixed period.
If a country suddenly needs more of a partner’s currency to meet its net settlement obligation due to, for instance, a seasonal import surge, its central bank can temporarily “borrow” that currency via the swap line.
Dollar debt concerns
None of this makes the BRICS system a substitute for the dollar, the bedrock of modern global finance. The dollar still constitutes about 59% of global foreign exchange reserves, underpins 58% of international payments and is used to invoice over half of all cross-border trade.
At the same time, the unprecedented scale of US and global dollar-denominated debt has become a primary source of systemic financial risk.
With the US national debt approaching $39 trillion and global debt estimated at $315 trillion, of which 64% is dollar-denominated, the world’s economic stability is perilously linked to sustained confidence in the dollar.
The key concern is a self-reinforcing cycle. Servicing the massive US debt relies on continuous global demand for dollar assets, primarily US Treasury bonds. If this demand falters due to factors like geopolitical shifts or US policies, interest rates could rise sharply.
Higher rates would dramatically increase the US government’s debt servicing costs (now the largest item in the Federal budget), while simultaneously tightening global financial conditions. This could trigger potential defaults and crises among other nations and corporations burdened by dollar loans.
This dynamic would create vulnerabilities for both the US and the global dependent on dollar liquidity.
US defensive actions
To protect the dollar in its role as the main global reserve currency, the United States employs a multi-faceted strategy that blends institutional, financial, and, at times, coercive measures, rather than relying on any single dramatic action.
A primary tool is the use of financial sanctions and access to the dollar-based global payment system (SWIFT) as a deterrent. Countries like Iran and Russia have faced severe economic isolation for challenging US interests, demonstrating the high cost of attempting to operate outside the dollar ecosystem.
This creates a powerful disincentive for others, as “de-dollarization” efforts risk cutting nations off from the world’s largest financial market and most traded currency.
Concurrently, the US is working to expand and modernize the dollar’s reach. The most significant emerging frontier is digital finance. US regulators and financial institutions are actively shaping the framework for dollar-denominated stablecoins, cryptocurrencies pegged to the US dollar.
By ensuring these digital assets operate within US regulatory oversight, the goal is to cement the dollar’s primacy in the rapidly evolving digital economy, co-opting innovation rather than being disrupted by it.
But recent trends are cause for concern among investors and central bankers. A key indicator is the accelerating demand for gold among central banks worldwide. In 2025, for the first time in nearly three decades, foreign central banks’ collective holdings of gold surpassed their holdings of US Treasuries in value terms.
This historic crossover was underscored by gold’s dramatic price surge, which rose 60-70% in 2025, pushing prices well above $4,000 per ounce for the first time in history. Prices have continued to rise in the first month of 2026, hitting over $5,500 per ounce.
This gradual rebalancing toward “neutral” assets like gold, one of the few that have no counterparty risk when the owner holds physical possession, enhances resilience without fully disrupting the current monetary order. But it highlights eroding confidence in an overly dollar-centric system.
The likelihood of the U.S. engineering a “soft landing” for its debt burden through controlled inflation remains a subject of intense debate. It would require inflating the debt away without collapsing the economy. But the erosion of the dollar’s purchasing power would lead to lower living standards for most Americans.
Shock absorber
Concerns about the dollar partly explain the renewed efforts by the BRICS to develop a parallel payment rail alongside SWIFT. Other concerns were the exclusion of Russia from the SWIFT system and the confiscation of $300 billion in Russian reserves.
Russia was not the first country to feel the wrath of the Western financial system; Iran, North Korea, and Cuba also had they assesst frozen or confiscated. But Russia became a watershed moment. If Russian assets can be frozen, no country is immune from meeting the same fate.
To be sure, significant hurdles remain before BRICS has a fully operational payment rail that can serve as an alternative to SWIFT, among them legal harmonization and technical implementation.
Most CBDCs of most BRICS countries are still in the testing stage (the digital rupee, e-CNY, and the digital ruble not yet fully scaled), and interoperability faces technical, regulatory, and governance challenges. But with unpredictable US policies and rising geopolitical and geoeconomic tensions, an alternative financial system is no longer an option but an economic and financial imperative.
By developing a parallel payment rail, the BRICS payment system could provide an alternative payment channel in case of a global crisis. It would prevent a complete halt in cross-border commerce and allow essential trades to continue, particularly in energy and commodities.
By ensuring continued transactional functionality for a significant portion of the global economy, a BRICS payment rail could mitigate contagion, buy time for coordinated policy response, and facilitate a more managed, less catastrophic adjustment to a new financial equilibrium.
Laying the rails
The development of BRICS payment rails is likely to evolve pragmatically, leveraging existing bilateral systems before expanding into a multilateral network. An example is the foundational link between India and the UAE, a key BRICS-associated economy, and six other countries.
India’s Unified Payments Interface is already interoperable with the UAE’s Instant Payment Platform (IPP), allowing for fast, low-cost cross-border transfers. This established corridor can serve as a tested model and technical blueprint for other BRICS partners.
Expansion would logically focus on integrating other members with robust domestic instant payment systems, such as Brazil’s PIX or, potentially, China’s CIPS/digital yuan infrastructure.
The challenge will be creating a central hub or shared messaging standard that connects these diverse national systems without requiring complete harmonization. Initially, this takes the form of a network of bilateral agreements that directly reduce dependency on Western-centric SWIFT for trade settlements in local currencies.
The long-term ambition is a unified BRICS platform that facilitates direct transactions in members’ currencies. Participation is voluntary. Success depends on overcoming geopolitical divergences and aligning technical standards.
Despite significant hurdles, direction of travel is clear enough to warrant attention. The age of a single hegemonic financial system is not ending overnight, but an alternative track is virtually a historical inevitability. BRICS, with India in the lead, is laying the first tracks.
