The story so far:

The 18th BRICS summit in New Delhi to be held in September, with India as the Chair, is expected to push for mechanisms to facilitate cross-border payments between members, including links between digital payment systems and central bank digital currencies (CBDCs), according to a report in The Hindu businessLine. Ahead of the summit, finance ministries’ and central bank representatives from BRICS countries met in Jaipur on August 12-13 to discuss financial cooperation, payments, and the wider use of national currencies in settling trade between members.

How do current cross-border payments work?

Sending money from one country to another requires a chain of transactions. Let’s say, an importer in Cape Town is buying passenger cars from an exporter in Chennai. The payment does not travel directly from the South African bank to the Indian one. It travels via a series of intermediaries called correspondent banks that hold accounts with each other. Since the South African bank does not hold an account with the Indian one (and vice versa), the payment is routed through a larger international bank that deals with both and is typically headquartered in London or New York. Because very few banks hold both rupees and rand, the payment involves converting rand to dollars and dollars to rupees where, in essence, the dollar acts like a vehicle currency, even though no American is involved in the trade.

What is SWIFT?

Now, apart from the money, there are also instructions that travel between the banks. This is handled by SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is a Belgium-based cooperative and overseen by the National Bank of Belgium along with the G-10 central banks, including the U.S. Federal Reserve. SWIFT is a messaging network, like a secure post-office. It enables institutions to exchange payment instructions through it and settle amounts separately. It is used directly by more than 11,000 institutions in over 200 countries. Smaller banks reach it indirectly through larger banks that are part of the SWIFT network, which is why it has become crucial and hard to displace.

What are the costs involved in each step?

Every intermediary charges a fee and the currencies are converted twice (rand to dollar and dollar to rupees). So the foreign exchange margins are paid twice. A 2019 BRICS survey of cross-border payment systems, conducted by Brazil, found that Brazilian respondents reported foreign exchange margins of 2.5% with the figure rising to 8.5% for payments in Africa and, in some cases, as high as 20%.

While speed of transactions used to be a major issue, SWIFT claims that its SWIFT Global Payments Innovation has helped reduce transaction times significantly. Some structural delays remain even as the transaction chain has also become thinner. The Bank for International Settlements (BIS) found that active correspondent banking relationships fell by 20% between 2011 and 2018 with regional declines varying from 12% to 30% and Latin America being the worst affected. The reasons for this decline were largely commercial. Payment volumes kept growing during this period, even as they travelled through a smaller network.

Why does BRICS want to change this system?

For developing economies, though, payments in a handful of dominant currencies such as the U.S. dollar, the euro and the Japanese yen expose countries to the monetary policies of the countries that issue them. The 2024 BRICS report under Russia’s chairmanship argued that this part of the financial system is monopolised by a single institution, raising transaction costs. Alternatives to the system suffer from the fact that they have to convince a large number of banks and regulators to join before being useful. A bank that uses an alternative system to deal with sanctioned entities — several Russian banks were cut off from SWIFT in 2022, following Russia’s invasion of Ukraine — also risks sanctions, which deters others from joining. A sanctions-hit Russia has pushed hardest for an alternative and is also the reason why others are wary of joining one.

What changes can be envisaged in the BRICS discussions?

The idea being explored is a payment system where, instead of payments moving through several correspondent banks with dollar conversions, national payment systems would connect to each other directly. This could be done in pairs as India and Singapore have already done for remittances by linking the former’s Unified Payments Interface (UPI) and the latter’s PayNow systems. But building bilateral systems individually will not scale appropriately.

An alternative could be via a shared hub that each country joins. One such effort is Project Nexus, designed by the BIS and handed over to a company set up by six central banks, including India’s Reserve Bank of India. It is set to go live only in 2027. Notably, it is not a BRICS initiative.

The BRICS discussions would extend this idea to the use of central bank digital currencies. Here, central banks issue digital versions of their currencies for use between banks — a settlement asset, not the retail digital rupee held by individuals — and exchange them on a common platform. Both legs of a currency swap would occur at the same instant or not at all, removing the risk of paying out before the other side pays, which speeds up settlement and reduces the capital banks must set aside against such transactions.

The 2024 BRICS report claims transactions settled this way would yield significant cost savings. Only one such platform runs today – mBridge, built by the BIS with the central banks of China, Thailand, Hong Kong, and the UAE, which the BIS handed to its participants and left in October 2024. Over 95% of its settlement volume is in China’s digital yuan, according to People’s Bank of China figures reported by Reuters.

The Kazan declaration of BRICS in 2024 agreed to “discuss and study the feasibility” of an independent settlement system called BRICS Clear, but the Rio declaration the following year did not mention it.

What is India’s position?

India’s own proposal, reported in January, is that members link their CBDCs for trade and tourism payments. Indian officials have been careful to frame the payment systems as a means of cutting transaction costs and speeding up settlement rather than as initiatives to displace the dollar — even as Russian proposals, and those of some Brazilian economists, have gone further, towards alternative financial systems that would reduce dependence on the dollar.

U.S. President Donald Trump, in November 2024, had threatened to impose 100% tariffs on BRICS countries if they moved away from the dollar and a further 10% tariff on countries aligning with vaguely defined “anti-American” BRICS policies during last year’s Rio summit. The threats were not carried out. But even though they were not targeted at payment systems, this could perhaps be a reason why Indian officials have framed discussions only as a matter of reducing transaction costs.

Published – September 06, 2026 02:16 am IST

Washington DC:

Donald Trump has sniffed trouble brewing afar against the United States – one that may topple the US’s position as a dominant global power and end Washington’s ability to impose economic sanctions against those it deems fit for the case. The storm in question is the steadily-expanding BRICS+ grouping.

Within hours of taking office as President of the United States, Donald Trump went after the BRICS+, threatening to impose 100 per cent tariffs on member countries. The reason Washington feels threatened by the grouping is because it makes the US dollar, America’s greatest weapon – one it can actually use, vulnerable.

In recent times there have been reports of a possibility of the BRICS+ nations working on a common currency which would replace the US dollar for international trade. The founding members of the BRICS are Brazil, Russia, India, China, and South Africa – the acronym of which is BRICS. Over the years, several other countries have become members of the bloc, namely Egypt, Ethiopia, Iran, the United Arab Emirates (UAE), and Indonesia. Saudi Arabia has accepted the membership, but has not formally joined yet, saying that the matter is under consideration.

BRICS+, which is shaping up to be the developing world’s alternative to the West-led G7, has set up its own financial structure and institutions, and is cooperating economically and diplomatically to reduce its dependence on the US Dollar – the default currency for international trade.

Donald Trump has now said his administration will impose 100 per cent tariffs against countries of the BRICS+ bloc, should they take any steps to replace the US dollar. “If the BRICS nations want to do that (replace the US dollar), that’s okay, but we’re going to put at least a 100 per cent tariff on the business they do with the United States,” President Trump told the international media shortly after his presidential inauguration.

“They will have a 100 per cent tariff if they so much as even think about reducing the use of the US Dollar in global trade,” he threatened.

Less than a month before he took office, Mr Trump had made a similar reference warning the BRICS+ countries. “We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US dollar or, they will face 100 per cent tariffs and should expect to say goodbye to selling into the wonderful US economy,” Donald Trump, then President-elect, had warned in December.

HOW THE US DOLLAR IS WEAPONISED IN SANCTIONS

The US Dollar, has for decades, been the world’s principal reserve currency. It has been the case since the Second World War, following which global institutions like the United Nations, World Bank, and International Monetary Fund, among many others were set up. All these institutions were set up in the United States – And America being the largest trading country of the world at that time led to US Dollar becoming the default currency for global trade.

In 1973, a new system was set up to moderate international transactions. This system is known as SWIFT, which is short for Society for Worldwide Interbank Financial Telecommunication. Since then, this has become the world’s commonly accepted and standardised model for international money transfers.

According to its website, SWIFT is a member-owned cooperative connecting more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories. SWIFT is neither a payment nor a settlement system, and is therefore is not regulated as such by any of the world’s central banks.

SWIFT is overseen by the central banks of G10 nations – namely, Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, United Kingdom, United States, Switzerland, and Sweden.

Since the US Dollar is the default currency of trade globally, and SWIFT is the method or channel of settlement, sanctions are imposed by controlling these two. Sanctions are imposed via SWIFT by restricting access to the network or completely prohibiting individuals, institutions, and countries from using its services. When sanctions are imposed, it completely freezes an account and restricts any further transactions from it.

SWIFT sanctions can freeze any bank’s ability to transact with the rest of the world. Under an international rules-based order, much of the global financial governance is dominated by the US-led West.

MULTI-POLAR WORLD

In the 21st Century, with the rise of Asia, and economies like China, India, Russia, Indonesia, UAE, Saudi Arabia, and others, the world has become much more multi-polar, instead of being bipolar – which was the case during the Cold War between the US and USSR through much of the 20th Century, post the two world wars in the first half of the century.

Brazil in South America and South Africa in Africa were also rising global economies.

With time, emerging economies became increasingly disgruntled with the dominance of the US Dollar being the default in almost all global transactions. This also kept them under a constant threat of Western sanctions, should they not two the line. To deal with this, BRICS leaders have for long reportedly advocated for de-dollarisation, and been in favor of increased trade in local currencies and even reportedly explored the possibility of a potential common BRICS currency.

The BRICS members have even set up the New Development Bank (NDB) and the Contingent Reserve Arrangement or CRA – which act and function exactly like the World Bank and the International Monetary Fund or IMF, respectively.

The so-far 10-member BRICS+ grouping already comprises nearly half of the world’s population and over a third of the global economy. It also has more than 25 per cent of the world’s landmass, produces more than 30 per cent of the world’s oil output and is on track to surge ahead of the G7 economies in less than 20 years.