In a letter to Brazil’s largest banks, the US Treasury’s Office of Foreign Assets Control (OFAC) demanded to know what steps they were taking to comply with the sanctions recently imposed on Brazilian Supreme Court Justice Alexandre de Moraes under the Global Magnitsky Human Rights Accountability Act. US President Donald Trump’s administration was delivering an unmistakable message: The US calls the shots and others must fall in line.
The decision to add Moraes to the US list of “Specially Designated Nationals” is unprecedented, given that he is neither an oligarch accused of corruption nor a human rights abuser. Instead, Moraes has been targeted for overseeing criminal cases related to the Jan. 8, 2023, insurrection in Brasilia, when supporters of then-Brazilian president Jair Bolsonaro stormed the country’s National Congress, Supreme Court and presidential palace in a bid to overturn his election defeat.
While this might look like a technical compliance issue, Trump’s actions are an assault on the independence of Brazil’s judiciary. Sanctioning Moraes does more than restrict his personal finances; it indirectly pressures the institutions he represents. It also forces Brazilian banks to choose between upholding domestic court rulings — thereby incurring severe US penalties — and preserving access to global markets. Either choice risks undermining their legitimacy at home and abroad.
Illustration: Mountain People
The OFAC letter also underscores the fragility of economic sovereignty. While the Magnitsky Act is formally a US statute, the US dollar’s role as the world’s leading reserve currency extends its reach far beyond the US’ borders.
Brazilian banks, like their counterparts around the world, rely on US banks to clear US dollar transactions, and many maintain subsidiaries in New York and other major financial centers. Whether you want to export soybeans to Asia or issue bonds on Wall Street, the financial infrastructure you depend on is American, and this dependency means that disregarding the OFAC is not an act of defiance, but a step toward financial exile, if not outright ruin.
This is the paradox of sovereignty. Legally, Brazil’s courts can rule that US sanctions do not apply domestically, since under both constitutional and international law, foreign measures must be formally enacted to take effect. However, economically, compliance is unavoidable, given that its trade and financial systems depend on US dollar-based infrastructure beyond its control. In practice, monetary sovereignty ends at the edge of the US dollar system.
The irony is striking. The US once wielded the Magnitsky Act to confront authoritarian abuses abroad, most notably by sanctioning Russian officials implicated in the 2009 murder of tax adviser and whistle-blower Sergei Magnitsky. Today, it is using the same law to intimidate a judge seeking to defend Brazil’s democratic order. By weaponizing foreign-policy tools to influence domestic legal processes, the Trump administration has effectively reduced Brazil’s sovereignty to a test of obedience.
Brazilian policymakers are in a difficult position. Routing Moraes’ personal financial transactions through domestic cooperatives is, at best, a temporary fix that does nothing to resolve the underlying issue. Longer-term alternatives, such as global payment systems built on blockchain technology, remain far from viable.
With Brazil still caught in the US dollar’s gravitational pull, the current crisis underscores the urgency of investing in alternatives to the US dollar-based system. New technologies and platforms — from blockchain-based networks to instant cross-border payments — could make settlements more efficient and potentially challenge the US dollar’s dominance.
For now, these initiatives are no more than fragmented pilot projects confined to “coalitions of the willing,” often excluding the developing economies that are most dependent on the US dollar. Moreover, even the most advanced multi-currency platforms still revert to the US dollar or the euro when local currencies lack sufficient liquidity, reproducing the very hierarchy they claim to challenge.
That said, these monetary innovations offer a glimpse of a future in which multilateral infrastructures are no longer controlled by a single government or private organizations operating under one country’s jurisdiction. However, realizing such a future would require extraordinary diplomatic and technical cooperation, along with new governance frameworks. Until then, the US dollar’s extraterritorial power would remain unmatched.
In that sense, the OFAC letter is more than a message to Brazilian banks; it is a reminder to all countries of the extraordinary power the US exerts through its control of the world’s financial infrastructure. To counter it, they must work together to develop credible alternatives, such as central bank digital currencies, interoperable instant-payment networks and broader multilateral arrangements. Otherwise, their monetary sovereignty and political autonomy would be left at the mercy of US policymakers.
Camila Villard Duran is associate professor of law at ESSCA School of Management.
Copyright: Project Syndicate
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