Asia’s shift beyond the dollar

Dollar dominance persists as Asian nations move to rely less on the currency

De-dollarisation has emerged as a key theme in global geopolitics, with some predicting the demise of the US currency. But the reality in Asia reflects a nuanced, strategic and long-term effort driven by geopolitical risks and the pursuit of greater financial sovereignty.

The dollar has served as the dominant currency in the global economy since World War II, acting as the primary medium for foreign reserves, trade invoicing, and foreign exchange transactions. Its supremacy stems from the size, strength and relative stability of the US economy, and its historical openness to trade and capital flows. The depth and liquidity of US financial markets remain unmatched, offering a vast supply of highly secure dollar-denominated assets.

But doubts about the dollar’s role have been growing in recent years. Rising policy uncertainty has raised questions about the strength and stability of the US economy. The US fiscal outlook has also come under scrutiny, highlighted by the recent loss of its triple-A credit rating when it was downgraded a notch to Aa1 by Moody’s Investors Service. Tariff policies since President Donald Trump returned to the White House have further eroded belief in US openness to trade.

More nations have signalled their intent to diversify away from the dollar, particularly after the Group of Seven nations imposed financial sanctions against Russia for invading Ukraine. The urgency to reduce reliance on the greenback has manifested in three key areas: regional bloc initiatives, digital infrastructure development, and a return to traditional safe havens.

Trade blocs

The BRICS bloc originally made up of Brazil, Russia, India, China and South Africa and currently comprising ten nations representing 56% of the world's population and 40% of the global economy, has been actively promoting domestic digital payment systems and piloting cross-border applications that facilitate trade in local currencies, bypassing US infrastructure. The Chinese renminbi now accounts for half of intra-BRICS trade settlements, reflecting its growing role within the group.

But there are significant challenges in settling payment imbalances between member countries. There is as yet no agreed clearing mechanism or official vehicle currency for the transactions. A country with a trade deficit within BRICS will need a universally accepted currency to settle its bill. Earlier initiatives like BRICS Pay proved unreliable, and China strongly opposes the proposed use of XRP, a cryptocurrency.

Beijing is neither ready nor willing to assume a leading currency role for BRICS, significantly slowing the group’s ambitions.

Meanwhile, the ten-member Association of Southeast Asian Nations (ASEAN) trading bloc, in its strategic plan for 2026-2030, aims to promote local currency settlements, improve payment infrastructure, and facilitate cross-border capital flows. More than 25% of intra-ASEAN trades were settled in local currencies in 2024, up from less than 10% in 2019.

Southeast Asia’s digital payment market is projected to exceed $1 trillion by the end of this year driven by adoption of QR codes such as Indonesia’s QRIS and the Philippines’ QR Ph, digital wallets like GrabPay and Paytm, and instant bank-to-bank transfers. Singapore’s PayNow is now linked to non-ASEAN member India’s Unified Payments Interface, which processes billions of real-time bank transfers monthly, facilitating cross-border payments without dollar intermediaries.

Gold, a traditional safe haven asset, has seen a resurgence alongside digital innovation. Asian nations have steadily bolstered their gold reserves, viewing the precious metal as a hedge against dollar exposure and geopolitical risk.

China’s gold reserves continued a steady accumulation trend and, in early 2025, hit an all-time high of 2,300 tonnes, valued at $273 billion based on September 18 prices. India has boosted its gold reserves by 35% over the last five years to 880 tonnes as of March 2025. Other emerging Asian countries like Kazakhstan and Uzbekistan have also significantly increased their gold reserves in recent years.

JPMorgan Chase estimates that the dollar’s share of Asian central banks’ reserves has dropped by 5%-10% in recent years due to their diversification into gold.

Dollar holds strong

Still, there is no evidence of rapid liquidation of the dollar from central bank reserves. As of September, the greenback still represented 58% of global foreign reserve holdings, according to US think-tank Atlantic Council's Dollar Dominance Monitor.

The euro, the second most-used currency, accounted for 20%, while shares of the other three top currencies – pound sterling, yen and renminbi – were in low single-digits.

Data from the International Monetary Fund also shows no significant decline in the collective dollar reserves of Asian countries, proving the currency’s resilience.

And 54% of global trade invoicing and 88% of foreign exchange transactions are still denominated in the dollar.

Stablecoins and CBDCs

The Trump administration is advancing a stablecoin strategy to preserve dollar supremacy amid these global shifts, while taking punitive actions to deter alternatives.

Some 90% of existing stablecoins are currently pegged to the dollar, facilitating fast and cost-effective cross-border payments beyond traditional banking.

The GENIUS Act in the US which became law in July establishes clear regulations for stablecoins backed by Treasury securities. This will help sustain demand for US Treasuries and maintain the dollar’s hegemony by embedding it in emerging digital payment ecosystems amid de-dollarisation pressures.

In response, Asian nations are proactively crafting stablecoin regulations. China is pursuing yuan-backed stablecoins to enhance internationalisation of the renminbi, using Hong Kong as an innovation hub.

Japan and Singapore are refining their regulatory frameworks for stablecoins to balance innovation with financial stability while safeguarding monetary sovereignty. South Korea, Malaysia, Thailand, and the Philippines are also developing their own frameworks.

Asia is also at the forefront of development of central bank digital currencies (CBDCs), with pioneering retail and wholesale projects. China’s e-CNY, launched in 2019, is the largest CBDC pilot in the world, with total transaction volume growing four-fold from 2023 to reach 7 trillion RMB ($986 billion) in June 2024. This was across 17 provincial regions in sectors such as education, healthcare and tourism.

Hong Kong launched a retail e-HKD pilot in 2022, exploring programmable payments and tokenisation. Its multi-CBDC wholesale payments platform, mBridge, which targets cross-border settlement efficiencies, achieved ‘minimum viable product’ launch in June last year.

India has piloted retail and wholesale digital rupee since late 2022, with its digital currency circulation reaching 10.16 billion Indian rupees ($122 million) by March 2025.

Singapore, after several years of research and development exploring blockchain technology for payments and cross-border settlements, decided to focus on wholesale CBDC and launched a pilot project in 2024. It also participated in a multilateral project to explore cross-border CBDC payments with other central banks.

Other countries, including Japan, Indonesia and the Philippines, are also at various stages of exploring CBDC.

Geopolitical tool

But the US remains an outlier. Trump issued an executive order in January this year halting all work on a retail CBDC. His administration imposed tariffs averaging 10% on major Asian exporters and threatened 50% tariffs on nations advancing de-dollarisation and BRICS cooperation.

As a result, the 2025 BRICS summit scaled back public declarations about de-dollarisation. But initiatives for alternative payment systems continue under the radar, driven by evasion of sanctions and a desire for autonomy.

The era of dollar hegemony is not going to end imminently. However, a multi-polar currency landscape is emerging where policymakers and market participants increasingly see the dollar as a geopolitical tool.

Asian nations are taking proactive steps to enhance their financial sovereignty and assert greater control over their place in the evolving global economic order. By advancing digital payment infrastructure with smart, fast and interoperable systems, they aim to foster the use of local currencies, reduce costs and foreign exchange risks, and support regional financial sovereignty.

*This article was published in Asia Asset Management’s October 2025 magazine titled “A reality check”.