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View all search resultsStrengthening sovereignty through local currency resilience
The rise of local currency transactions presents a challenge to the traditional dominance of the United States dollar in global trade.
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A teller counts United States dollar and rupiah bills on March 1, 2024, at a money changer in Jakarta. (Antara/Muhammad Adimaja)
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mid ongoing trade tensions between the United States and China, the Chinese government is strategically focusing on bolstering the international value of the renminbi, positioning it as an alternative to the US dollar. Central banks worldwide are gradually decreasing reliance on the US dollar for short-term reserves and exploring expanding their renminbi holdings for the long term.
Leading this shift are local currency transactions, where countries conduct trade deals and transactions in their domestic currencies rather than the US dollar. These transactions reduce costs and currency risks, promoting financial stability and economic growth.
China's initiatives in local currency transactions have shown success, as seen in the growth of cross-border yuan settlements with Indonesia, which expanded by 51 percent to 16.2 billion yuan (US$ 2.3 billion) in the last year. This trend towards greater use of local currencies in international trade aligns with China's efforts to enhance economic sovereignty and reduce dependence on external currencies.
Indonesia's local currency transaction (LCT) value surged by nearly 149 percent to $11.7 billion in the first half of 2025, indicating a 45 percent increase in participating customers. This reflects Indonesia's commitment to reducing dependency on the US dollar and enhancing cross-border trade and investment. Indonesia's expansion of LCT cooperation with China, Japan, South Korea and the United Arab Emirates shows its readiness to lead in regional financial integration.
The rise of local currency transactions presents a challenge to the traditional dominance of the US dollar in global trade. Bank Indonesia (BI), a key player in the ASEAN+3 region, recognizes the need to reduce reliance on the US dollar for financial resilience.
Despite challenges like market infrastructure gaps and regulatory barriers, BI is taking strategic steps to promote the use of local currencies. Initiatives include strengthening Appointed Cross Currency Dealers (ACCDs), enhancing payment interoperability and exploring mechanisms like regional currencies and Central Bank Digital Currencies (CBDCs) to foster integration and stability.
Indonesia has made significant progress in implementing local currency settlement frameworks, especially through bilateral arrangements with countries like Malaysia, Thailand and Japan. Collaborating with regional partners and leveraging multilateral platforms, Indonesia aims to build an inclusive cross-border payment ecosystem. Further integration with regional partners is crucial to fully realize the potential of local currencies in ASEAN+3.
