Somewhere in the European Central Bank's annual report on the international role of the euro, published a few days back, there is a sentence that ought to have set off more alarms than it did. Settlement activity on China's Cross-Border Interbank Payment System rose by more than a third in the days around the outbreak of the Middle East war. Quieter still, the report notes that some ships made payments in renminbi via CIPS, or in crypto-assets, to transit through the Strait of Hormuz during March and April. A handful of transactions, in absolute terms. But a tell.
The dollar is not dying. It does not need to die for the world's payment plumbing to start looking less like a single pipe and more like a switchboard.
The Hormuz Tell
For seventy years, the working assumption of treasurers and central bankers has been that when a regional crisis flares, dollars buy you out of trouble. They buy fuel, they buy insurance, they buy the wire that gets a cargo moving. The ECB's detail tells us that assumption is starting to fray at the edges. When a ship in a hurry could not, for whatever reason, settle a passage in dollars, the alternative chosen was renminbi or, more telling, crypto.
The size of the shift in flow is worth dwelling on. Customer-related cross-border payments by Chinese banks in renminbi reportedly hit USD 1.4 trillion in March 2026, roughly 30% higher than the previous month. CIPS itself had grown a meagre 3% in 2025, after years of 20%-plus expansion; the war reversed that deceleration in a single month. None of this dethrones the dollar. All of it builds optionality for whoever pays attention.
A Defensive Pile Of Gold, And Not Much Else
India sits in this picture awkwardly. We have, by ECB's reckoning, added about 130 tonnes of gold to the reserves stack since 2022, alongside Turkey, China and Poland. That is a sensible defensive instinct after watching Russia's reserves get frozen. It is also where the imagination seems to have stopped.
The position is genuinely odd. Of the major economies thinking about reducing dollar dependence, we are the only one that already runs a domestic retail payments network most of the world envies, settles more real-time transactions than the rest of the planet combined, and has spent a decade quietly exporting that stack to friendlier jurisdictions. From inside a national administration that has built and operated citizen-facing digital infrastructure at scale, I can say with some confidence that the hard engineering problem of cross-border instant payments was solved at home long before it became geopolitically interesting. What is missing is the political will to treat the stack as strategic infrastructure rather than a soft-power side project.
Wrong Question, Right Answer
Most Indian commentary on the de-dollarisation theme falls into a trap: which bloc should we join, the dollar one or the renminbi one. This is the wrong question, and it is asked by people who confuse a payment rail with a treaty. India's interest is not in joining a bloc. It is in being able to settle, invoice, hold and route in whichever instrument is cheapest, safest and least politically charged on the day a particular contract has to close. The word for that is optionality, and it is built, not declared.
Three moves are worth making.
Treat payment corridors as foreign policy
UPI acceptance in the Gulf, Southeast Asia, parts of Africa and small island economies is being built piecemeal, often as tourism convenience. Stop calling it that. A corridor that lets an Indian importer pay a Vietnamese supplier in rupees or dong, without a dollar leg, is strategic plumbing. Build it with line items in the budget and missions actively negotiating acceptance, the way other countries negotiate visa-on-arrival regimes.
Insist on settlement clauses in trade agreements
The next ten free trade agreements India signs should, at minimum, contain a clause allowing settlement in either party's currency for a defined share of trade, with central bank windows providing convertibility at agreed bands. Project mBridge, the multi-CBDC platform connecting China, Hong Kong, Thailand, the UAE and Saudi Arabia, shows what a serious version of this looks like. India is conspicuously absent from that table; that is a choice we keep making by default.
Stop confusing gold with a strategy
A 130-tonne pile is a backstop. It is not active monetary architecture. The state can hedge tail risks in metal and at the same time build the live system that determines who pays whom in normal times. The two are not substitutes.
What The Classroom Did Get Right
Years ago at Columbia, in Prof. Richard Robb's International Capital Markets class, the formative lesson was that the international monetary system runs on inertia. It does not change because a paper is published or a summit is held. It changes when, in some operationally tedious moment a ship in a hurry, a bank under sanction, a captain refusing to wait the cheaper, safer instrument turns out not to be the dollar. That moment does not need to come at scale to matter. It needs to come reliably enough that the next CFO writes the alternative into her treasury policy as a permanent option, not an emergency one.
Xi Jinping's 1 February call for the renminbi to become a global reserve currency, taken alongside CIPS opening up to multicurrency settlement from the same date, is best read in that light. It is not a slogan. It is a procurement plan for whichever country wants to underwrite the next system.
The Habit, Not The Asset
The dollar's strength has never been an asset class. It is a habit, a default keystroke on every treasurer's terminal. Habits are sticky. They are also vulnerable to small, repeated, observable counter-examples. A few ships at Hormuz paying in renminbi, or in stablecoins routed through some Gulf trading hub, will not by themselves break that habit. But anyone reading central bank reports for a living should treat what happened in March and April as the rehearsal it was.
India holds the world's best retail payments stack and a serious geopolitical hand. Both are pointed away from each other today. The most useful thing the Government of India could do this year is to draw a line between them: to convert a fintech achievement into an instrument of statecraft. The next time ships are in a hurry at a chokepoint, the question worth being able to answer is whether any of them are settling in rupees.
#InternationalFinance #DollarDominance #UPI #Renminbi #CIPS #Geoeconomics #IndianEconomy #PaymentSystems
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