BRICS Expansion and Changes in Dollar Hegemony
This article explains what BRICS “expansion” means, how the dollar-centered global financial order could change, in what areas and at what pace. Includes an investor checklist.
1) BRICS Expansion – What Has Changed?
BRICS started as a cooperative body of emerging economies, but has recently expanded its membership and diversified its agenda to increase influence. The key changes are:
① Diversified Membership
A mix of energy exporters, manufacturing powers, and large domestic markets forms a real-economy chain. This makes it easier to connect with payment and financial infrastructure cooperation.
② Expanded Agenda
Expansion into financial/payment areas such as diversified trade settlement, development finance, and digital payment infrastructure. Also, stronger connectivity between regional blocs.
2) Structural Foundations of Dollar Hegemony
The dollar's status is based not just on trust, but on a complex foundation of infrastructure, economies of scale, rule of law, and liquidity.
- Liquidity Depth: Depth of the U.S. Treasury market and derivatives ecosystem.
- Legal & Institutional Trust: Contract enforcement and predictable regulation.
- Network Effect: Path dependence—“I use it because everyone else does.”
- Payment & Messaging Infrastructure: Dollar clearing networks and global correspondent banking systems.
| Factor | Dollar | Alternative (Concept) |
|---|---|---|
| Liquidity / Market Depth | Very deep | Relatively limited |
| Legal & Institutional | High trust | Varies greatly by country |
| Network Effect | Strongly entrenched | Partial replacement by region/product |
| Payment Infrastructure | Mature | Alternative networks under development |
3) Catalysts for Change: Trade Settlement, Commodities, Sanction Evasion
Partial replacement of the dollar system tends to appear first in specific sectors.
- Diversified Trade Settlement: Bilateral currency swaps, local currency settlement, expansion of digital payment networks.
- Commodity Settlement: Long-term contracts for oil/gas/metals trying currency diversification.
- Sanction Evasion: Countries with higher sanction risks are more likely to experiment with non-dollar alternatives.
4) Possible Scenarios
Short Term (1–2 years)
- Increase in partial non-dollar settlements in some commodity contracts
- Expansion of bilateral swap/clearing network tests
- Volatility rises depending on political events
Medium Term (3–5 years)
- Progress toward multi-currency systems centered on regional blocs
- Mixed settlements in development finance and infrastructure projects
- Expansion beyond oil/gas to other commodities
Long Term (5–10 years)
- Dollar monopoly weakens but retains core liquidity currency status
- Standardization of interoperability in payment/clearing infrastructure
- Increased use of digital currencies (wholesale CBDC)
5) Investor Checklist
Portfolio
- Currency Diversification: Check dollar share + consider KRW/JPY/EUR/local currency ETFs
- Commodity Exposure: Set allocation rules for energy, metals, gold
- Geographic Diversification: U.S.-centered plus Asia/Middle East/Latin America
Risk Management
- FX Hedge Rule: Set volatility threshold (e.g., review at ±5%)
- Policy Calendar: Track summits, sanctions news, OPEC+ schedules
- Liquidity Check: Define volume/spread criteria
6) Frequently Asked Questions (FAQ)
Q1. If BRICS creates a common currency, will the dollar weaken immediately?
A. The “three pillars” of payment infrastructure, rule of law, and liquidity are required, which cannot be built in the short term. Improving mutual payment infrastructure comes before a common currency.
Q2. What signals indicate changes in commodity settlement?
A. Futures curve changes, news of diversified settlement currencies, rising demand for certain currencies (swap/futures volume).
Q3. What should individuals do first?
A. Identify FX exposure → diversify currency/region/asset → maintain event calendar.
7) Key Takeaways (One-Page)
- Dollar hegemony is likely to see gradual multipolarization rather than sudden collapse.
- BRICS expansion may first be felt in commodities and trade settlement.
- Investors should focus on structural diversification of currency/region/asset and monitor policy events.
8) References & Disclaimer
※ This article is for educational purposes only. Investment gains/losses belong to the investor. Update membership changes, statistics, and policies with official and credible sources.
- Annual reports from international organizations, central banks, development banks
- Commodity exchange disclosures, settlement/clearing statistics
- Summit joint statements and agenda documents
