India connects BRICS countries' CBDC to challenge the US dollar! Trump threatens 100% tariffs in retaliation

India’s Reserve Bank has officially proposed to include the “BRICS CBDC Interconnection” in the core agenda of the 2026 summit, aiming to simplify cross-border trade and travel payments through a digital currency bridge, bypassing SWIFT’s high fees. India’s e-Rupee has accumulated over 7 million users, and all nine BRICS countries are in the pilot stage. However, this move is seen as part of a “de-dollarization” strategy, with Trump threatening to impose 100% punitive tariffs, escalating geopolitical tensions.

India Hosts 2026 Summit to Push CBDC Cross-Border Bridge

According to Reuters, as the 2026 BRICS summit approaches in India, India’s Reserve Bank has formally recommended to the government to include “interlinking central bank digital currencies (CBDCs) of BRICS members” as a key agenda item. The proposal aims to facilitate cross-border trade settlement and tourism payments among BRICS countries through digital currency interoperability, making fund flows faster and cheaper.

If consensus is reached among the leaders, this will be the first time the BRICS group actively promotes the creation of a unified digital currency linkage framework, marking a significant step for emerging markets in the digital asset sovereignty process. The initiative is based on a consensus reached at the 2025 Rio de Janeiro summit, where members pledged to enhance payment system interoperability.

India’s central bank believes that connecting official digital currencies can bypass the cumbersome and costly correspondent banking system. For importers, exporters, and even cross-border travelers, this could enable near-instant and low-cost settlement experiences. Major BRICS members—Brazil, Russia, India, China, and South Africa—along with new members UAE, Iran, Egypt, and Indonesia, totaling nine countries, are already in the CBDC pilot phase. Although not yet fully commercialized, laying the technological bridge is considered an urgent priority.

The core advantage of this digital currency interoperability mechanism lies in efficiency and cost reduction. Traditional cross-border payments involve multiple bank intermediaries, each charging fees and taking days to settle. The proposed CBDC bridge would allow direct links between central banks, enabling nearly instant transactions with minimal fees. For small and medium-sized enterprises and individual travelers, this change could be revolutionary.

Technical Integration Challenges and Foreign Exchange Swap Solutions

Despite the ambitious vision, implementing a digital currency linkage among nine or more countries presents significant challenges in standardizing technology and governance rules. Insiders note that concerns among member states about adopting each other’s technology platforms could slow progress, requiring high consensus on technical standards, governance structures, and settlement protocols.

China’s digital yuan (e-CNY) is the most mature in terms of technology, followed by India’s e-Rupee, but development progress varies among other members. More complex are differing positions on data sovereignty, privacy, and regulatory authority. India’s central bank aims to promote a neutral technical standard that allows countries to retain independence of their systems while achieving interoperability through standardized interfaces.

To address potential liquidity issues caused by trade imbalances, a feasible solution under discussion is establishing a bilateral foreign exchange swap mechanism between central banks. This arrangement would allow central banks to adjust positions through swap contracts when currency settlements are heavily skewed, proposing netting settlements on a weekly or monthly basis.

This strategy clearly draws lessons from past experiences. When India and Russia attempted to expand bilateral trade using their currencies, Russia accumulated billions of rupees (Rupee) that were difficult to use in international markets, leading to settlement deadlock. India’s central bank eventually allowed Russia to invest these funds in Indian bonds. By combining CBDC with automated settlement protocols, BRICS aims to optimize the “domestic currency settlement” pathway, avoiding fund stagnation and exchange rate risks.

The foreign exchange swap mechanism operates on the principle that when India’s exports to China far exceed imports, China’s central bank accumulates large amounts of digital rupees. At this point, the two central banks can activate the swap agreement, converting digital rupees into digital yuan, and periodically settling net positions. This maintains the advantages of domestic currency settlement while preventing excessive accumulation of a single currency.

De-dollarization Concerns and Trump’s 100% Tariff Threat

Led by India, this proposal is particularly sensitive amid rising geopolitical tensions and is interpreted as a significant move toward “de-dollarization.” Although the Reserve Bank of India has repeatedly emphasized that the main motivation for promoting CBDC linkage is to improve “payment efficiency” rather than overthrow the dollar’s dominance or ideological opposition, it is undeniable that this initiative would enhance BRICS countries’ resilience against Western sanctions and financial blockades.

This “technical hedging” posture is an opportune moment for India to demonstrate digital financial diplomacy amid global uncertainty. After Russia was expelled from SWIFT following the Ukraine conflict, and China faces potential US financial sanctions, establishing an independent payment network outside Western systems has become a strategic necessity.

However, this “bypassing the dollar” plan has raised high alert in Washington. Former President Trump has repeatedly accused the BRICS alliance of being “anti-American” and threatened to impose punitive tariffs of up to 100% if members attempt to evade dollar payments. Under this high-pressure environment, India’s central bank has maintained a cautious tone in its proposal, emphasizing that it is a “purely technical” development plan aimed at facilitating trade finance and tourism, trying to frame it as a “non-political” initiative to minimize direct conflict with the US government.

Trump’s tariff threats are not idle. The US has imposed strict financial sanctions on Iran, Venezuela, and others. As a major US trading partner, India must balance advancing the BRICS CBDC plan with maintaining its relationship with the US. India’s strategy is to emphasize that this is an open technical platform, not an exclusive alliance, and future participation by other countries is possible.

e-Rupee Gains Ground, CBDC Counteracts Stablecoins

In the domestic market, India’s digital currency development has achieved notable progress. Since launching the retail e-Rupee pilot in December 2022, over 7 million individual users have adopted it, and the Reserve Bank of India is actively expanding application scenarios through offline payments, government subsidy transfers (programmability), and more. Meanwhile, China is also vigorously promoting the internationalization of its digital yuan (e-CNY).

This high level of focus on sovereign digital currencies is not only about efficiency but also a response to challenges posed by private cryptocurrencies, especially stablecoins. Recently, RBI Deputy Governor T. Rabi Sankar issued a strong critique of stablecoins, stating that they are inherently unstable and lack sovereign backing. If widely adopted in large transactions, they could threaten monetary stability, fiscal policy effectiveness, and potentially be used for money laundering and regulatory evasion.

Compared to this, CBDCs are seen as safer, regulated, and with a single, stable value. By promoting international CBDC linkage at the 2026 summit, India is paving the way for economic integration among BRICS countries and defining a new digital financial system led by governments, independent of Western systems, for the Global South.