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Rising Use Of Local Currencies In Cross-Border Payments

Aug. 29, 2023 10:56 PM ET2 Comments
Otaviano Canuto profile picture
Otaviano Canuto


  • BRICS leaders aim to use national currencies for cross-border payments, reducing reliance on the US dollar and other global currencies. Countries seek alternative payment mechanisms to protect against geopolitical sanctions.
  • China's renminbi has seen the greatest expansion in use through bilateral agreements, settling half of its foreign trade and investment transactions.
  • The growing use of local currencies in external payments will be part of what we have already called a “slow and bounded de-dollarization”. A partial fragmentation of the global payments system is underway.

market vendor at his stall with cassava flour in Brazil

golero/E+ via Getty Images

At the August 22-24 BRICS summit in Johannesburg, the leaders of Brazil, Russia, India, China and South Africa said they wanted to use more of their national currencies for cross-border payments, which are currently dominated by the U.S. dollar and other global

This article was written by

Otaviano Canuto profile picture
Otaviano Canuto, based in Washington, D.C area, is a senior fellow at the Policy Center for the New South, professor at George Washington University, principal of the Center for Macroeconomics and Development and a non-resident senior fellow at Brookings Institution. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.He has authored and co-edited 8 books and over 160 book chapters and academic articles, and is a frequent contributor to numerous blogs and periodicals.

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Comments (2)

fxpoet profile picture
While true, I expect that the pace of change is likely to remain extremely slow. The issue of nonconvertability is a huge problem for countries, especially since acquiring, say, CNY by selling commodities to China is fraught with the potential political issues that China can impose. There is certainly nothing that prevents them from deciding that a counterparty, Saudi Arabia, for instance, if it decided it liked the US better after all, and reduced its support for China's global initiatives, might find its funds trapped in Beijing.
I feel that the convertibility issue is too often glossed over and yet remains the primary issue for reserve managers around the world
Otaviano Canuto profile picture
@fxpoet That's exactly why the issue of local currency use will remain only significant where public sectors have fingers
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