Dedollarisation: What It Really Means for Trade Finance
- Sushil Sampath
- Aug 29, 2025
- 4 min read
Imagine cutting your trade transaction costs from 30% to just 1%. That’s what Africa achieved with its Pan-African Payments and Settlements System (PAPSS). By reducing dependence on the US dollar for intra-continental trade, PAPSS unlocked billions in savings and faster, smoother settlements.
This is the bigger story of dedollarisation. It isn’t just about geopolitics—it’s about transforming trade finance into a system that’s cheaper, faster, and more inclusive.
What Dedollarisation Really Means
Dedollarisation is the gradual move away from the US dollar as the primary currency for international trade. For decades, the dollar acted as the middleman in global commerce—whether two African countries traded coffee or two Asian nations traded oil, transactions often flowed through USD.
Now, more countries are asking: why pay higher fees, take on exchange-rate risk, and remain vulnerable to US monetary policy when local currencies can do the job?
The drivers are clear:
Sanctions and geopolitics make dollar dependency risky (DBS Bank).
Exchange-rate volatility can erode margins.
Local systems can dramatically reduce costs (NTU Singapore).
Financial sovereignty gives countries more control over trade.
Regional Shifts Already Underway
Africa: PAPSS
Africa’s PAPSS links 15 countries and 150 banks, cutting settlement fees from as high as 30% to just 1%. That saves African economies an estimated $5 billion annually (Reuters).
BRICS: New Development Bank and BRICS Pay
BRICS nations are pushing local-currency settlements, supported by the New Development Bank. They’re also rolling out BRICS Pay, a decentralized payment messaging network that allows members to bypass SWIFT and settle directly.
India: Rupee Settlements
India is building bilateral trade agreements in rupees with over 22 countries. The Reserve Bank of India has set up special Vostro accounts to support smoother non-dollar settlements.
China: The Yuan’s Rise
The Chinese yuan is now the world’s second most used currency for trade finance. With the CIPS system as an alternative to SWIFT, China is rapidly building infrastructure for yuan-denominated trade.
Benefits for Trade Finance
For trade finance professionals, the benefits of dedollarisation are practical and immediate:
Lower Transaction CostsNo need for expensive correspondent banking chains. Local currency settlements reduce overhead and processing fees.
Faster SettlementsRegional systems like PAPSS and CIPS streamline cross-border transactions, improving cash flow.
Reduced FX RiskBusinesses trading in their own currency avoid double conversions and volatile USD swings.
Greater InclusionSMEs and smaller banks can access cross-border trade finance without the barrier of dollar liquidity (ForumIAS).
Challenges That Remain
Dedollarisation is not a magic switch. The transition brings its own challenges:
Liquidity Gaps: Some local currencies lack deep markets.
Trust Issues: New systems must build credibility against the stability of USD.
Commodity Pricing: Oil, gas, and minerals are still largely dollar-denominated.
Uneven Adoption: Some regions and industries are quicker to adapt than others.
The Road Ahead
Dedollarisation doesn’t mean the dollar disappears. Instead, it means the world is shifting toward a multipolar currency landscape, where USD, yuan, rupee, euro, and others all share the stage.
For banks, fintechs, and corporates, this shift will require rethinking:
Risk management frameworks.
Hedging products.
Credit and trade finance structures across multiple currencies.
The smart players will start adapting now, building flexible systems that can handle a multipolar trade world.
Conclusion
Dedollarisation is not about dethroning the dollar overnight. It’s about creating a trade finance system that’s cheaper, more resilient, and more accessible.
The businesses, banks, and countries that embrace this shift early will capture the real benefits—lower costs, faster settlements, and stronger control over their trade destiny.
FAQs on Dedollarisation and Trade Finance
1. What is dedollarisation?
Dedollarisation is the gradual process of reducing dependence on the US dollar for international trade and financial transactions. Countries are shifting to local currencies or alternative systems to lower costs, manage risks, and increase financial independence.
2. Why is dedollarisation happening now?
Key drivers include:
High costs of USD-based settlements.
Sanctions and geopolitical risks tied to dollar dominance.
Exchange-rate volatility impacting margins.
Regional initiatives like PAPSS in Africa and BRICS Pay.
3. How does dedollarisation benefit trade finance?
It lowers transaction costs, speeds up settlements, reduces exposure to dollar volatility, and makes cross-border trade more accessible—especially for SMEs and smaller banks.
4. Which regions are leading the dedollarisation push?
Africa: PAPSS has slashed settlement costs for intra-African trade.
BRICS: Expanding local-currency trade via the New Development Bank and BRICS Pay.
India: Bilateral rupee-based trade with over 22 countries.
China: Yuan is now the second most-used currency in trade finance.
5. Does this mean the US dollar will collapse?
No. The dollar will remain dominant in the near term, especially in commodities like oil and minerals. Dedollarisation simply creates a multipolar system, where other currencies gain importance alongside the USD.
6. What challenges does dedollarisation face?
Limited liquidity in some local currencies.
Trust and stability compared to the USD.
Global commodity pricing still tied to dollars.
Uneven adoption across countries and industries.
7. How should trade finance institutions prepare?
Banks and fintechs need to adapt risk frameworks, develop hedging tools in multiple currencies, and strengthen infrastructure to support settlements outside USD. Early adopters will gain a competitive edge.
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