The U.S. Dollar continues to dominate global payments through the SWIFT network, underscoring its vital role in international trade and finance. This dominance impacts various economies and businesses worldwide, as the dollar's widespread use facilitates seamless transactions and strengthens its position as the world's primary reserve currency. The implications of this trend are significant for global commerce and economic stability.
When the leaders of the recently expanded BRICS group convene in Kazan, Russia, this week, one key topic will be Russia's initiative to establish an alternative international payment system aimed at diminishing the U.S. dollar's influence in global trade and finance. This new platform seeks to provide greater protection for countries like Russia against future sanctions.
In response to Russia's invasion of Ukraine in February 2022, several Russian banks were barred from the SWIFT network as part of extensive international sanctions, complicating Russia's ability to engage in global trade and conduct cross-border transactions, although not entirely preventing it. SWIFT (Society for Worldwide Interbank Financial Telecommunication) serves as a global payment network that enables banks and financial institutions to transfer funds internationally. It functions as a secure messaging system that allows banks to communicate financial transactions quickly and accurately.
Our chart illustrates that the majority of transactions on SWIFT are conducted in U.S. dollars, with no other currency approaching the dollar's prominence in international payments. In August 2024, the dollar made up 49.1 percent of SWIFT transactions, followed by the euro at 21.6 percent, the British pound at 6.5 percent, and the Chinese yuan at 4.7 percent. When excluding payments made within the Eurozone, the dollar's share rises to 60 percent, highlighting its status as the closest equivalent to a "world currency," much to the displeasure of Russia and other U.S. adversaries.
Ahead of the BRICS summit, Russia shared plans with journalists for a network of commercial banks among BRICS member states that would be interconnected through their respective central banks. This proposed system aims to facilitate token-based cross-border payments in local currencies, thereby decreasing reliance on dollar transactions and potentially lowering the costs associated with international payments for BRICS nations.
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Source: Statista