Are we nearing a turning point for local currency in cross-border payments?

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Many governments have long supported a pivot toward local currency usage. For developing economies, especially, the US dollar represents a limited and costly resource. Dollar reliance also creates an unwanted tether to US monetary policy, which may conflict with domestic economic priorities.

In response to these realities, numerous governments have backed new frameworks designed to facilitate local currency payments. The ASEAN Local Currency Settlement (LCS) initiative – led by Indonesia, Malaysia, Thailand, the Philippines, and Singapore – enables direct trade settlement without involving a dollar leg. In Africa, the Pan-African Payment and Settlement System (PAPSS), launched by the African Union and Afreximbank, allows intra-continental transactions in local currencies. Finally, China’s CIPS (Cross-Border Interbank Payment System) offers an RMB-based alternative to SWIFT, aligned with Beijing’s ambition to internationalise the yuan.

Image: Greg Watson