TLDR:
- Aiming to lessen reliance on the U.S. dollar, the BRICS nations are focused on creating new financial infrastructures and potentially introducing a fresh currency.
- Russia’s Deputy Foreign Minister clarifies that BRICS’s goal is to enhance autonomy rather than adopting an anti-Western approach.
- In 2024, the BRICS coalition is growing with five more nations joining and thirteen additional countries becoming partners.
- A possible new currency under BRICS could see a 40% backing by gold while being 60% supported by local member currencies.
- A new payment platform called BRICS Bridge is underway, serving as a possible replacement for the SWIFT system.
The BRICS economic union is actively pursuing the creation of alternative payment systems and exploring the introduction of a novel currency, according to updates from high-level representatives. These efforts coincide with the group’s expansion in January 2024, with the inclusion of five new members, as it aims to minimize dependency on the U.S. dollar for global trade.
Russian Deputy Foreign Minister Mikhail Bogdanov highlighted the drive for greater sovereignty among BRICS members while stressing the initiative is not anti-Western, during a discussion with Tass.
The bloc reached new heights in 2024, bringing in Egypt, Iran, the UAE, Saudi Arabia, and Ethiopia as full members, with countries like Algeria, Belarus, and Nigeria joining as partners, showing increased engagement with BRICS's financial strategies.
During the 16th BRICS Summit in Kazan, Russia, from October 22-24, 2024, Russian President Vladimir Putin showcased a possible BRICS banknote, noting the aim is adding alternatives to the existing SWIFT system rather than replacing it entirely.
A major milestone involves the BRICS Bridge payment platform, described by Kremlin aide Yury Ushakov in March 2024. It leverages blockchain technology to link financial systems of member nations, facilitating transactions with central bank digital currencies using specific payment gateways.
The 'Unit,' a prospective BRICS currency, is envisioned to be backed with both gold and local currencies. Dilma Rousseff, the New Development Bank President, mentioned early arrangements suggest 40% gold and 60% local currency backing.
Currently, the U.S. dollar is a formidable force in international trade, affecting 88% of currency exchanges and forming 59% of the reserves held by central banks. Still, shifts are happening—reports from 2023 indicated one-fifth of oil trade used currencies other than the U.S. dollar.
Together, the original BRICS nations plus Egypt hold over 20% of the world’s central bank gold reserves, with Russia, China, and India being prominent holders, possessing thousands of metric tons each.
Project mBridge is a parallel endeavor that is gaining momentum, involving several central banks, including those from China, Hong Kong, Thailand, and the UAE, with Saudi Arabia joining recently. By June 2024, it reached a basic working phase, supporting real-value transactions compatible with the Ethereum Virtual Machine.
Project mBridge
There are significant challenges in the technical implementation of these systems. The BRICS payment platform must be efficient and affordable for everyone from governments to private citizens and requires new infrastructures and consensus among member states.
Challenges
The global economic landscape contributes to these changes, with U.S. sanctions pushing Russia and Iran towards new financial paths. Recently, India has declined using the yuan for oil payments with Russia, exemplifying the complications in moving away from the U.S. dollar in trade.
The Atlantic Council’s report from June 2024 asserts that despite these initiatives, the U.S. dollar is likely to maintain its status as the world’s primary reserve currency for the foreseeable future. Their monitor highlights the dollar’s prevalent role in reserves and international exchanges worldwide.
Developments in the U.S. presidential race of 2024 have brought these issues to light. Former President Donald Trump has committed to imposing severe tariffs on countries that lessen their reliance on the U.S. dollar, specifically proposing 60% to 100% tariffs on imports from China.
At the recent BRICS Summit, participants embraced the Kazan Declaration, which laid out their views on global and regional challenges, emphasizing tighter financial integration among members with a focus on local currency and cross-border payment systems.
The head honcho at Blockonomi and the brains behind Kooc Media, a UK-based online news hub, is an advocate of open-source software, blockchain advancements, and Internet freedom.
