Is The Dollar Losing Its Grip On Global Payments? What Comes Next For De-Dollarisation

The US dollar still sits at the centre of the global monetary system, accounting for 56.7% of allocated foreign exchange reserves in the second quarter of 2026, even as total global reserves climbed to about $13.22 trillion. But the more consequential change for currency markets may be unfolding away from central-bank balance sheets, as countries build the infrastructure to settle trade, move money across borders and connect domestic payment systems without automatically routing every transaction through the dollar.

For much of the past decade, de-dollarisation has meant central banks diversifying reserves, accumulating gold and gradually reducing their concentration in dollar assets. That is the first leg of the transition — a change in where the world saves. The next phase is increasingly about how the world pays, through local-currency settlement, interconnected instant-payment systems and sovereign digital currencies. The dollar is nowhere close to being displaced, nor is another currency ready to take its place. What is beginning to change is more fundamental: countries are developing alternatives that could reduce the need to use the dollar as the intermediary in every international transaction.

That distinction matters because the dollar's global influence has never rested on reserves alone. Its deeper advantage comes from its role at the centre of international transactions. Two countries can trade with each other, neither of them being the United States, and still invoice, finance or settle that transaction in dollars. This creates structural demand for the currency far beyond America's own trade flows and helps explain why movements in the dollar's reserve share, viewed in isolation, tell only part of the story.

The first leg of de-dollarisation loosens the dollar's hold on global savings. The second could loosen its hold on global transactions.

The Second Leg Of De-Dollarisation Is Taking Shape In Payments

The infrastructure for this shift is no longer theoretical. India and the UAE have established a Local Currency Settlement System that allows eligible cross-border transactions to be invoiced and paid in rupees and dirhams. India is also part of Project Nexus, an initiative designed to connect domestic instant-payment systems across countries and make cross-border retail payments faster and more direct.

The scale makes this particularly relevant for India. Merchandise and services trade, investment and remittance flows together generated an estimated $1.9 trillion of cross-border payment demand in FY2023-24, according to RBI research. The top 10 partner countries accounted for more than half of this demand, providing a sizeable base on which local-currency settlement and interoperable payment networks could potentially expand.

According to the Reserve Bank of India, India’s cross-border payment demand from merchandise and services trade, investment and remittance flows was estimated at $1.9 trillion in FY2023-24.

The development of sovereign digital currencies adds another layer to this changing architecture. India has been piloting the digital rupee, China has developed the e-CNY, Russia has moved ahead with the digital rouble and Europe is progressing with plans for a digital euro. These developments are not interchangeable with local-currency settlement or payment-system connectivity, but collectively they expand the infrastructure through which money could eventually move directly between national monetary systems.

This is also where the debate around de-dollarisation can become misleading. The global monetary system does not need a new currency to replace the dollar one-for-one for its structure to change. It needs credible alternatives that allow countries to conduct at least some transactions without first creating demand for dollars.

That process will be gradual. Local-currency settlement requires sufficient foreign-exchange liquidity, legal certainty and counterparties willing to transact in those currencies. Linking payment systems does not, by itself, determine the currency in which a transaction is ultimately settled, while sovereign digital currencies remain at very different stages of development around the world.

Yet the direction is becoming clearer. No single payment network, bilateral arrangement or digital currency threatens the dollar's position on its own. Taken together, however, these developments begin to reduce something that has been central to the dollar's power for decades — the obligation to use it. Anindya's report explicitly argues that the second leg is emerging through bilateral trade, local-currency settlement, instant-payment connectivity, stablecoins and CBDC interoperability, with the cumulative effect being more important than any single initiative.

What A Multipolar Currency System Could Mean For The Dollar

The dollar's share of global reserves provides a useful starting point. According to the IMF's latest COFER data, the dollar accounted for 56.7% of allocated reserves in Q2 2026, compared with 57.18% in the previous quarter. The IMF, however, noted that the value of dollar claims was largely unchanged during the quarter, an important qualification that makes the latest decline in share less dramatic than the headline number alone might suggest.

But reserve diversification is only one part of the transition. The more important question for the coming years is whether the dollar remains as indispensable to transactions as it has been to reserves.

That does not imply the end of dollar dominance. The United States still benefits from deep and liquid capital markets, the scale of dollar funding and an international financial system built around the currency over decades. A more plausible outcome is a progressively multipolar monetary system, where the dollar remains the world's most important international currency but operates alongside a growing number of viable settlement routes.

India's position in that transition is particularly interesting. Its large cross-border payment flows, the scale of UPI, the digital rupee and efforts to expand local-currency settlement give it several of the building blocks required to participate in a more interconnected monetary system. The RBI itself has examined how digitalisation and interoperable cross-border payment systems could support a greater international role for the rupee, while retaining existing freely convertible currency arrangements.

The shift, therefore, is unlikely to arrive as a single dramatic moment when one currency replaces another. It is more likely to emerge transaction by transaction, payment corridor by payment corridor, as countries gain more ways to move money without automatically passing through the dollar.

The first leg of de-dollarisation was about where the world saves. The second is increasingly about how the world pays.

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