Moscow Exchange stops accepting the dollar as collateral

Moscow Exchange stops accepting the dollar as collateral

Russia's largest stock exchange announced that, as of August 29, the dollar will no longer serve as collateral for transactions. This is not a symbolic move: it is the first time a major country has officially removed the US currency from its market mechanisms. The announcement came without technical detail — the statement did not explain how that collateral will be replaced — and with a timeline already underway: earlier this month the exchange had cut the use of the dollar as collateral from 50% to 25%, and now it has taken it to zero.

The context is no coincidence. Russian authorities have spent months voicing concern about currency holdings they describe as "unfriendly," both from individuals and companies, and are calling for them to be converted into alternatives. The message between the lines is simple: if your reserves can vanish overnight by decision of a third party, you stop using them as backing.

What ending dollar collateral actually means

Collateral is the guarantee a trader deposits to cover the risk of a transaction. If the exchange no longer accepts dollars for that purpose, intermediaries have to find something else: rubles, yuan or other assets. The practical consequence is that the dollar loses a specific function within the Russian financial circuit, not just its role as a medium of exchange.

Some argue this is the first brick of a bigger shift, while others reduce it to a defensive measure forced by sanctions. The underlying debate is not whether Russia wants the dollar or not, but whether it can afford to keep depending on a currency controlled by those imposing sanctions on it. The answer Moscow gives with this move is no.

The yuan advances in international settlements

The figures circulating in the analysis point to a real shift: international settlements and payments in currencies other than the dollar and the euro would have risen from 21% to 50% in 2022, and the Chinese yuan would have climbed from 1% to a range of 40-45% over the same period. These are figures that, if confirmed, describe something more than a technical adjustment.

The backing comes from the top: Gazprom announced that China will start paying for Russian gas in yuan and rubles instead of dollars. That is the kind of move that turns a stock exchange decision into an infrastructure change. The full calculation, with the breakdown by markets and timeframes, is what gives the real measure of the shift.

The BRICS and the tug-of-war over the reserve currency

The president of the BRICS international forum, Purnima Anand, said that Brazil, India, China and South Africa are cooperating increasingly with Russia to overcome the consequences of Western sanctions and reduce the use of the dollar. Turkey, Saudi Arabia and Egypt would have applied to join the bloc. If that materializes, the club stops being an acronym for emerging markets and becomes a platform for monetary coordination.

The discussion over whether this means the end of dollar hegemony runs at two speeds. Part of the analysis holds that the dollar still has inertia for a while yet, but that its death as the international transaction currency is a matter of time. Others point out that the dollar is used not only because it is strong, but because there is no alternative with the same market depth. The question is how long it takes for one to appear.

From Saddam to Pilingui: the precedent nobody wants to repeat

The most repeated argument is the historical one: Saddam Hussein and Muammar Gaddafi tried to leave the dollar circuit and ended up the way they did. The difference highlighted now is that Russia has considerable military power and that Europe would be caught up in any escalation. The parallel is tempting and treacherous at the same time: neither of those two countries had the energy leverage or the alliance with China that Moscow has.

At the other extreme, some recall that China forgave the debt of 17 African countries generated through 23 recent loans, in addition to increasing cooperation. The reading is that the yuan is advancing not just by decree, but by building infrastructure and forgiving debt. Sooner or later, those countries will have to choose which currency they settle in.

What could happen to the dollar from now on

The hypothesis gaining weight is one of sustained inflation in the United States if China and another large country such as India trinc the Russian path. The mechanism is well known: if fewer countries demand dollars for their transactions, the currency Washington issues stays at home and loses value. It is not a prediction, it is an arithmetic consequence that depends on how many join in.

The scenario taking shape is not an implosion, but a wearing down. The dollar will remain the reserve currency for years, but every decision like the Moscow Exchange's takes away one of its functions. And functions, once lost, do not come back on their own. The unknown is the pace, not the direction.