A BRICS Effort Is Underway To Undo SWIFT Monopoly — Can It Work?

When Jim O'Neill, then chairman of Goldman Sachs Asset Management, coined the term "BRICS" in 2001, he likely did not envision it evolving into a powerful 'non-West' geopolitical bloc.

BRICS’ evolution from an economic concept to a geopolitical force has been remarkable. The expanded members now collectively represent 44.3 per cent of the world’s population, 29.5 per cent of the land mass, and 30.8 per cent of the global gross domestic product (GDP) (49.7 per cent of global GDP in purchasing power parity, or PPP, terms).

With the Kazan summit, though, BRICS have moved much beyond the collective power of its member countries. The announcements at the summit held last week in Russia have much deeper connotations for the new world order as we see it develop.

While Western media focused on geopolitical theatre and the symbolic expansion of the BRICS club, they largely missed the technical revolution brewing in the background.

The creation of BRICS Clear, a new payment and settlement system powered by a BRICS Stablecoin and aided by BRICS Reinsurance, is the most consequential challenge to American financial hegemony since the birth of the Bretton Woods system.

Unlike Bretton Woods, which created an entirely new global order, the Kazan summit's significance lies in officially beginning the transition to a multipolar financial world.

It is not a revolution that replaces the existing system overnight, but rather the first credible step towards an alternative financial architecture — and that might prove just as transformative in the long run.

The Global SWIFT Monopoly and US Power

When a Malaysian company buys parts from Vietnam or an African nation imports grain from Brazil, the transaction likely flows through SWIFT (Society for Worldwide Interbank Financial Telecommunications).

This system, while it may sound purely technical, is the most powerful monopoly in the world, serving as the global finance nerve centre. It processes over 40 million messages daily for moving trillions of dollars.

Imagine it as the global Unified Payments Interface (UPI) system, which runs the plumbing of almost all cross-border financial payments worldwide.

It is worth noting that any such financial payment system needs a unit of accounts in which the trading products can be priced so that trades can occur. And in this unit of account lies the crux that links SWIFT to the United States' (US) power.

Essentially, the unit of account for the SWIFT system is the dollar. This leads to the creation of an artificial but powerful demand for the dollar.

This seemingly technical arrangement has deep implications. Because of the SWIFT monopoly and its use of the dollar, countries must maintain substantial dollar reserves to participate in global trade, making the dollar a global reserve currency.

These reserves, predominantly held in US Treasury bonds, effectively provide Washington with an endless credit card. The US can run persistent deficits while the rest of the world — to build their dollar reserve — has little choice but to keep lending money to it via purchasing US Treasuries for its trade.

Effectively, the instrument of dollar dominance in the world and therefore the financial might of the US and its Western allies is this SWIFT system.

The BRICS Clear and BRICS Stablecoin Challenge to Swift

As a monopoly, SWIFT not only establishes the dollar as the global reserve currency but also gives the US the ability to ‘sanction’ other countries.

What is called a sanction is effectively the act of removing the targeted countries' banks from the SWIFT system, cutting them off from global trade — a method the US has used for years.

Until recently, not many countries were willing to go decisively against the US and do bilateral trade with sanctioned countries. However, that changed with sanctions on Russia — which found India, China, and some other countries willing to make bilateral trades one-on-one with it.

However, such a bilateral system, which first depends on finding a willing partner, can become cumbersome. A separate financial system with pricing, payments, and other aspects has to be negotiated and set up with each country — this is far from an ideal mechanism compared to a global centralised financial system such as the SWIFT dollar system.

Enter the BRICS Clear system with a (BRICS) stablecoin managed by the New Development Bank as the required unit of account for pricing trading goods. This system elegantly addresses the main challenge: integrating bilateral trade across member nations to form a single, cohesive financial system for multilateral trade.

Rather than attempting to replace the dollar outright — a goal that has repeatedly failed — it simply provides an alternative pipeline for trade financial settlement. Countries can gradually shift their trade without making dramatic political statements.

How BRICS's Stablecoin-based Digital Trade Ledger Can Work

Serving as the unit of accounts for the BRICS Clear system, the BRICS stablecoin mechanism is a sophisticated digital solution for tracking international trade.

For instance, when Brazil sells steel to Indonesia, their transaction is recorded in a digital unit pegged either to gold or to a weighted basket of BRICS currencies (for example, 30 per cent yuan, 30 per cent rupee, and so on). The New Development Bank acts as the bookkeeper, tracking all such trades over a period, perhaps monthly.

At settlement time, it calculates the net positions — who owes what to whom — and final payments are made in local currencies. Brazil might get paid in Reais, Indonesia pays in Rupiah, and nobody needs dollars in between.

The genius lies in its simplicity: countries trade as usual, but instead of every transaction needing dollars and Western banks, the system bundles trades together and settles them directly.

It's not creating new currency in the conventional sense — unlike bitcoin or the dollar, you won't find it in wallets or use it to buy coffee. It's creating a new accounting system via virtual currency to move existing money.

Implications for US Hegemonic Financial Power

BRICS members, along with new partner countries, account for 35-40 per cent of global trade. A shift of even half this trade to BRICS Clear could create a seismic shift in global finance. Central bank reserves, which typically mirror trade patterns, could see dollar holdings drop from 58 per cent to 35-40 per cent by the decade's end.

The implications extend far beyond global trade and financial plumbing. America's ability to project power globally rests significantly on its financial dominance. When Washington wants to punish an adversary, its go-to move is often financial sanctions. This tool becomes significantly less effective if target countries have alternative channels for trade and settlement.

More worryingly for Washington, the impact on US Treasury markets could be severe. If central banks reduce their dollar reserves as projected, substantial sales of Treasury bonds will be triggered. With the US already grappling with rising debt levels, the timing couldn't be worse. The Congressional Budget Office projects persistent trillion-dollar deficits; financing these becomes considerably more challenging if global demand for Treasuries declines.

Conclusion

The Kazan summit may well be remembered as the moment when dollar dominance began its slow decline. Not through dramatic declarations or sudden shifts but through the quiet establishment of alternative financial infrastructure. The changes won't be immediate — financial systems have considerable inertia. But the direction is clear.

Western policymakers would be wise to take note. The BRICS Clear system represents not just a technical challenge to SWIFT's monopoly but a fundamental threat to a key pillar of American power. In the grand chess game of global finance, BRICS has just made a subtle but potentially decisive move.

For the US, the challenge will be adapting to a world where financial dominance can no longer be taken for granted. The dollar won't disappear as a global currency, but its role may increasingly resemble that of the British pound in the mid-20th century — still important but no longer dominant.

The key question isn't whether this transition will happen but how disruptive it will be.