Several countries are accelerating a shift toward local currency transactions (LCT) in cross-border trade, reducing their reliance on the US dollar as the default medium of international commerce. According to a new report, this trend — already well-advanced in Asia, Europe, Latin America, and Africa — could, over the long term, erode the dollar's dominant role in the global financial system.

Asia Leads the Local Currency Push

Asia has emerged as the most active region in developing LCT arrangements. Indonesia has established bilateral LCT frameworks with Malaysia, Thailand, China, Japan, South Korea, and the United Arab Emirates, with further partnerships reportedly in development.

Bank Indonesia reported that the value of transactions under its LCT framework reached the equivalent of $49.4 billion through August 2026 — a substantial increase from $25.7 billion for the whole of 2025. In other words, the first eight months of 2026 had already approached nearly twice the previous year's full-year total.

Meanwhile, China is actively promoting the internationalisation of the renminbi through bilateral trade cooperation and cross-border payment systems. BRICS members are also exploring the use of national currencies to facilitate intra-bloc trade, the report states.

The Global Footprint of De-Dollarisation

The shift is not confined to Asia. In Europe, the use of the euro in intra-European trade has become a defining feature of regional economic integration. Latin America has a long history of bilateral and regional payment mechanisms that bypass the dollar. In Africa, the Pan-African Payment and Settlement System (PAPSS) has been developed specifically to facilitate cross-border payments in local currencies, reducing the continent's dependency on dollar-intermediated transactions.

Why Countries Are Making the Switch

Several structural drivers are accelerating the LCT trend. First, local currency arrangements can reduce conversion costs by limiting the need to route transactions through the dollar. Second, they can help businesses manage certain foreign-exchange risks, though the actual benefit depends on market liquidity and prevailing exchange-rate movements.

Third — and arguably most significant — geopolitical considerations have become a central motivation. Trade tensions, financial sanctions, and uncertainty surrounding major economies' policy directions have prompted governments to diversify currency arrangements and seek greater flexibility in managing international financial relationships. This is the Nth such inflection point in dollar-scepticism since the 2008 global financial crisis, but the current wave is broader in geographic scope and institutional depth.

Strategic Implications for the US Dollar

The expansion of LCT carries strategic consequences that extend well beyond economics. If more countries settle bilateral trade in their own currencies, demand for dollars in international transactions could gradually decline in certain market segments, according to the report.

Over the longer term, such structural changes could influence global demand for US financial assets, including Treasury securities, and potentially narrow some of the advantages the United States derives from the dollar's dominant international role. Critics argue, however, that the dollar's network effects and the depth of US capital markets make a rapid displacement unlikely — the shift is expected to be gradual and uneven across sectors and regions.

With BRICS expansion, Asia's LCT momentum, and Africa's PAPSS all advancing simultaneously, the architecture of international payments is quietly but meaningfully being redrawn.