A local-currency clearing system may offer BRICS a more practical path to de-dollarization than a common currency.

The debate over de-dollarization has gained renewed momentum in recent years. Geopolitical tensions, sanctions, supply chain disruptions, and excessive dependence on a dollar-centric trade have prompted countries to rethink their reliance on the United States dollar. Within this larger conversation, the BRICS grouping has emerged as an important forum for exploring alternatives to the existing monetary order.

Yet, much of the discussion surrounding BRICS has been dominated by a single idea; the creation of a common BRICS currency similar to the euro. Such comparisons often obscure the realities confronting BRICS. The European monetary union was the culmination of decades of political integration, economic convergence, and institutional coordination, while BRICS, by contrast, consists of countries with differing economic structures, strategic interests, and financial systems. It lacks a common central bank, a unified fiscal architecture, and the political will necessary to sustain a shared currency.

While creating a new currency is appealing, such a proposal may be neither practical nor necessary. Rather than pursuing a monetary union, BRICS could achieve many of the same objectives through a more modest, flexible, and realistic framework built around local-currency settlements and multilateral clearing arrangements.

A common currency may not be the right question. The more pertinent one is whether BRICS can reduce its dependence on the dollar while preserving economic autonomy and avoiding the institutional burdens of a monetary union. A multilateral local-currency settlement mechanism may offer precisely such a path.

The mechanics of local-currency trade

Today, even trade between two countries that do not directly involve the United States is often settled in dollars. This compels countries to maintain large dollar reserves, exposes them to exchange-rate conversion costs and increases their........

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