In a recent development, international financiers have withdrawn support for a promising paytech solution in the Middle East, citing concerns over its potential use in sanctions-evading transactions with Russia. This move comes as the Bank for International Settlements (BIS) announced on August 31 that it would cease involvement with the mBridge project, a cross-border digital payment system that allows direct, peer-to-peer currency exchanges between nations, bypassing the dollar-based system.
BIS initially spent four years developing mBridge to enable nations to conduct secure, efficient cross-border trade outside traditional, dollar-dependent pathways. However, rising concerns over the system’s possible use by sanctioned countries, particularly Russia and Iran, to bypass international restrictions prompted BIS to pull back. The organization, which represents central banks worldwide, clarified that the decision was not a reaction to political pressures. Still, it emphasized that their technology should not facilitate sanctions violations.
BRICS—an alliance of Brazil, Russia, India, China, and South Africa, recently expanded to include countries such as Egypt, Ethiopia, and the UAE—has been working on a similar alternative payment system. This solution aims to establish trade pathways that sidestep dollar dependency, aligning with Russia’s and Iran’s needs for sanctions-free transactions. Recently, new BRICS members from the Middle East, including the UAE, Iran, and Egypt, expressed support for developing a cross-border payments infrastructure outside US influence, heightening interest and tensions in the global financial landscape.
BIS’s retreat from mBridge followed the successful pilot of a currency exchange trial among central banks in Asia and the Middle East. The pilot received enthusiastic support from participants, including Saudi Arabia, a recent member. BIS General Manager Augustin Carstens noted that while the project had reached a “minimum viable product” stage, it would require several years before it could fully mature. This announcement aligns with BIS’s vision of a globally compatible digital currency system, though its departure signals that national regulatory bodies will now lead development independently.
Experts argue that the US’s use of the dollar’s dominance in global trade as a tool for economic leverage has driven some BRICS nations to seek alternative payment solutions. Although these systems could support sanctioned trade, they remain far from challenging the dollar’s current supremacy. Robert Wade, a political economist at the London School of Economics, commented that while alternative systems might take years to compete meaningfully with the dollar, BRICS countries are likely to prioritize these developments as long as the dollar remains a US weapon in trade wars.
Despite the challenges, BRICS members continue advancing cross-border payment systems for efficiency and sovereignty. Private firms in BRICS nations are already trading digitally across borders, leveraging blockchain and digital assets—a development that BRICS member countries encourage but that the US tends to resist. Analysts highlight the Gulf region’s openness to working with both G20 and BRICS frameworks, seeing these initiatives as compatible with its trader roots.
Saudi Arabia, a BRICS observer, has yet to formalize its membership but is signaling support for BRICS initiatives. The UAE, a full member, has encountered US sanctions over its trade with Russia. Such developments underscore the growing global movement to de-dollarize trade, which could significantly impact the structure of international finance if these alternative payment systems gain traction.
While BRICS’s new cross-border payment efforts seek to ensure smooth transactions outside US control, it’s unclear how quickly these systems could effectively scale. For now, the US dollar remains dominant, but a BRICS-led financial shift away from it could redefine global trade in the coming years.
