BRICS Payments 2026: Yuan Settlement, mBridge, and the De-dollarization Scorecard

The reserve currency baseline #

The IMF Currency Composition of Official Foreign Exchange Reserves series is the cleanest available scorecard. The dollar share of allocated reserves stood at roughly 58 percent at the end of 2024, down from 71 percent at the turn of the millennium and from 65 percent in 2014. The euro has held in a 19 to 21 percent band, the yen near 5 to 6 percent, sterling near 5 percent, and the renminbi near 2.2 percent after peaking above 2.8 percent in early 2022. The residual category, which captures the Australian dollar, Canadian dollar, Swiss franc, and a basket of smaller currencies, has absorbed most of the dollar's lost share.

The trajectory matters more than the level. Dollar share is declining at roughly 30 to 50 basis points per year on a smoothed basis, with valuation effects accounting for a meaningful portion in any given quarter. At that pace, the dollar would still account for more than half of allocated reserves in 2030. Reserve managers diversify slowly because the alternatives lack depth, the U.S. Treasury market remains the only genuinely deep safe asset pool, and rebalancing is procyclical with the dollar index. Talk of a reserve regime shift in the 2026 to 2028 window is not supported by the COFER data.

CIPS and the yuan settlement build-out #

The Cross-Border Interbank Payment System operated by the People's Bank of China processed an annualized run-rate above 175 trillion yuan in 2025, up from roughly 80 trillion in 2022. Direct participants exceed 160 institutions and indirect participants exceed 1,500 across more than 110 jurisdictions. Daily message volume has crossed 30,000 on peak days. These are real numbers, but context is essential: SWIFT carries roughly 50 million messages per day, and CIPS still relies on SWIFT messaging for a majority of its instructions despite the rollout of CIPS Connector and proprietary messaging.

The SWIFT RMB Tracker shows the yuan oscillating between the fourth and fifth most-used currency for global payments by value, with a share between 3.5 and 4.7 percent. Strip out Hong Kong and the share drops below 1.7 percent. Swap line activations have been the more interesting indicator. The PBOC has bilateral local-currency swap agreements with more than 40 central banks, with cumulative activations rising sharply in 2023 to 2025 as Argentina, Pakistan, Sri Lanka, and several African central banks drew on yuan liquidity to settle import bills and service Chinese-currency debt.

The takeaway for treasurers is that yuan invoicing is now realistic for trade with China and for selected commodity flows, but yuan working capital and yuan-denominated hedging remain shallow outside the mainland and Hong Kong. Offshore CNH liquidity is concentrated, dealer balance sheets are thin during stress episodes, and the basis between CNY and CNH can widen sharply when capital account pressures rise.

mBridge and the CBDC settlement layer #

Project mBridge is the most consequential cross-border CBDC pilot. Originally a partnership among the BIS Innovation Hub, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the UAE, and the Digital Currency Institute of the PBOC, it reached minimum viable product status in mid-2024. The BIS announced its withdrawal from active participation in late 2024, and the remaining central banks have continued development under their own governance. Saudi Arabia joined as a full participant in 2024, and the platform has hosted observers from more than 30 jurisdictions.

The technical architecture matters. mBridge uses a permissioned distributed ledger with central bank nodes issuing wholesale CBDC for cross-border settlement. Atomic payment versus payment is supported, settlement finality is achieved within seconds, and the system is designed to operate without correspondent banks or USD nostro accounts. In live pilot transactions, the platform settled trade flows including hydrocarbon shipments between the UAE and China priced in yuan and dirham, with no dollar leg.

The constraint is liquidity, not technology. A wholesale CBDC corridor is only as useful as the local-currency liquidity that participating banks can mobilize on the platform. mBridge does not solve the fundamental problem that exporters often want dollars even if importers want to pay in local currency. Through 2026 to 2028, mBridge is best understood as one rail among several, with realistic addressable volume in the low tens of billions of dollars equivalent annually rather than the trillions that would be required to displace correspondent banking.

SWIFT alternatives and the messaging question #

Sanctions on Russia in 2022 catalyzed serious investment in SWIFT alternatives. Russia's SPFS now connects more than 550 institutions across roughly 20 countries, though most volume is domestic or with Belarus, Kazakhstan, and a handful of friendly counterparties. India's SFMS handles domestic interbank messaging and has been positioned for limited cross-border use with Russia and Iran. Iran's SEPAM remains largely bilateral. The combined non-SWIFT messaging footprint is meaningful for sanctioned-jurisdiction trade but trivial relative to global flows.

The more important development is the willingness of large non-Western banks to maintain dual connectivity. Banks in the Gulf, Southeast Asia, and parts of Africa increasingly operate both SWIFT and CIPS Connector, both SWIFT and SPFS for limited counterparties, and bilateral host-to-host links for high-volume corridors. This optionality, rather than wholesale displacement, is the realistic 2026 to 2028 trajectory. Compliance teams should expect greater complexity in transaction monitoring as payment chains involve more bespoke routing.

Bilateral local-currency settlement #

The proliferation of bilateral local-currency settlement arrangements is the most visible expression of de-dollarization, even if the volumes are modest. The Banco Central do Brasil and the People's Bank of China have operationalized direct yuan-real settlement through CIPS, with state-owned exporters of soy, iron ore, and beef increasingly invoicing in yuan. Estimates put yuan-denominated Brazil-China trade at roughly 25 percent of bilateral flows in 2025, up from less than 5 percent in 2022.

The Russia-India rupee settlement experiment has been instructive. After 2022 sanctions pushed Russian oil exporters to accept rupees for Indian purchases, rupee balances accumulated rapidly in Vostro accounts at Indian banks because Russia had limited use for the currency. By 2024, Russian exporters had largely shifted to dirham, yuan, and rupee-dirham hybrid structures, with Indian refiners settling roughly 60 percent of Russian crude purchases through non-dollar channels but only a small share in pure rupees.

The India-UAE rupee-dirham framework, formalized in 2023, is the most functional of the new bilateral arrangements. Trade in non-oil goods, remittances, and increasingly oil settlement use direct rupee-dirham conversion through linked payment systems including UPI and the UAE's Aani instant payment platform. Argus and other commodity reporting agencies have begun tracking dirham-denominated crude assessments alongside the dollar benchmarks, a quiet but consequential signal of pricing fragmentation.

Three scenarios for 2026 to 2028 #

Base case, probability 55 percent. Gradual fragmentation continues. Dollar reserve share drifts to 56 to 57 percent by end-2028. Yuan SWIFT payments share reaches 5 to 6 percent. CIPS volumes double again. mBridge and bilateral arrangements absorb 8 to 12 percent of intra-BRICS trade. Treasurers operate multi-currency settlement stacks. Sanctions remain enforceable on most flows.

Acceleration case, probability 25 percent. A sanctions episode against a major BRICS member triggers rapid migration to non-dollar rails. Saudi Arabia formalizes yuan oil pricing for non-Western buyers. mBridge expands to include Indonesia, Egypt, and Nigeria. Dollar share falls below 55 percent by end-2028. CNH liquidity deepens materially.

Resilience case, probability 20 percent. A risk-off episode drives flight to dollar safety. Yuan share retreats. mBridge expansion stalls on governance disputes. Argentina or another distressed swap-line user defaults on yuan obligations. Dollar reserve share stabilizes near 58 percent. The de-dollarization narrative loses momentum.

Implications for treasury and risk teams #

First, plan for optionality rather than substitution. The realistic 2026 to 2028 outcome is a more fragmented payments landscape with more currencies, more rails, and more bespoke counterparty arrangements. Build the operational capacity to settle in yuan, dirham, and rupee for relevant trade flows, but do not assume dollar liquidity will be available in stress.

Second, treat CIPS, mBridge, and bilateral platforms as live infrastructure for sanctions risk assessment. Transaction monitoring must evolve to capture multi-rail payment chains. Compliance frameworks should distinguish between sanctioned-jurisdiction exposure and ordinary diversification.

Third, watch the commodity pricing layer. When Argus, Platts, and other agencies publish non-dollar benchmarks alongside the dollar reference, the locus of price discovery is shifting. That is the leading indicator for genuine reserve diversification, more reliable than headline COFER moves or political communiques from BRICS summits.

Sources #

• IMF COFER currency composition of reserves
• CIPS Cross-Border Interbank Payment System statistics
• BIS mBridge project documentation
• SWIFT RMB tracker
• PBOC People's Bank of China statistics