BRICS’ New Digital Currency: A Challenge to the Dollar?—Experts Weigh In
BRICS countries are evaluating the launch of a new digital currency. (Photo By: Mikhail Svetlov/Getty Images)
- BRICS members are looking to create a new digital currency.
- Experts weigh in on the feasibility of a new BRICS currency.
- Creating a BRICS currency could have significant implications for the global financial environment.
- Although the talks were confirmed, Russia’s Ushakov didn’t reveal any details.
The U.S. dollar has long been the dominant global reserve currency, rooted in its role since the Bretton Woods Agreement in 1944.
However, with recent geopolitical shifts, particularly using the dollar as a political tool through sanctions, BRICS members are exploring a new unified global digital currency.
Sewn Mouths on Common Currency?
On Oct. 23, Russian presidential aide Yuri Ushakov confirmed that the leaders of the BRICS countries discussed the possibility of transitioning to a common currency during their recent meeting in Kazan. However, he emphasized that these discussions are not for public consumption:
“This was discussed. These are confidential matters; some of our colleagues are quite reserved about discussing these issues publicly.”
Ushakov’s statement follows President Vladimir Putin’s earlier assertion that the transition to a single BRICS currency is not currently on the table.
Putin suggested that focusing on using national currencies, developing new financial instruments, and creating an alternative to SWIFT is more practical, at this stage.
While the topic of a common BRICS currency has been discussed, it appears that the leaders are approaching the issue cautiously and prefer to keep the details private for now.
BRICS’ New Global Digital Currency
The BRICS nations (Brazil, Russia, India, China, and South Africa) are accelerating efforts to create a new digital currency to reduce their reliance on Western currencies and bolster their economic influence.
The move is largely driven by recent global financial instability and aggressive U.S. foreign policies, which have intensified tensions among the bloc.
By promoting a new digital currency, BRICS nations aim to diminish their dependence on the U.S. dollar and mitigate the impact of American sanctions.
While no official timeline has been confirmed, discussions are gaining momentum, with Russia and Iran leading the way in advocating for the creation of the currency.
Among the proposals under consideration is backing the currency with gold.
BRICS Evaluate Gold-Backed Digital Currency
As BRICS progresses with its digital currency project, research suggests that it will likely be backed by gold.
By anchoring the new digital currency to gold, the BRICS nations can provide security and trust, appealing to countries seeking financial sovereignty.
A gold-backed digital currency could also provide a hedge against the inflationary pressures that often plague fiat currencies.
“Gold has long been recognized as a reliable store of value, protecting against economic uncertainty and inflation. This enduring reputation has persisted even after abandoning the gold standard in the 1970s. This decision made gold a logical choice for the BRICS initiative,” research revealed.
By leveraging its gold holdings, the BRICS bloc can create a stable and credible alternative to the U.S. dollar, bolstering its economic influence on the global stage.
Experts Weigh In
The Shift to Gold
Alessia Amighini , co-head of the Asia Centre department for the Institute for International Political Studies, notes that Russia’s invasion of Ukraine and subsequent Western sanctions accelerated the de-dollarization trend in the bloc.
She noted that, as a result, central banks purchased a record 1,136 tonnes of gold last year to reduce their reliance on the U.S. dollar.
Gold reserves will likely back BRICS’ new currency as member nations stock up.
The substantial gold reserves and production capabilities of the BRICS Nations, particularly Russia and China, further support this initiative.
Since June, China has recently emerged as a leader in the gold market, buying a record 100 tonnes .
Feasibility Is a Concern
While BRICS nations move forward with plans for their new digital currency, some experts are raising caution flags about its feasibility, citing the diverse economic systems of its member nations as a significant challenge.
Melissa Pistilli, an analyst with Investing News Network, noted that the new currency may struggle to balance the influence of the Chinese yuan with the incorporation of smaller currencies like the Russian Ruble.
Despite these obstacles, Pistilli sees potential benefits, including more efficient cross-border transactions, increased financial inclusion, and deeper economic ties among member states.
“The creation of a BRICS currency marks a significant move towards reshaping the international financial order. Although challenges remain, the potential advantages are considerable, and the world watches closely to see how this project will influence the future of global finance,” Pistilli noted.
BRICS’ New Payment System
As part of its efforts to revolutionize global finance, BRICS recently launched a new global payment system, BRICS Pay, at the BRICS Business Forum in Moscow.
The system offers a decentralized, cost-efficient alternative to traditional international payment methods, allowing for cross-border transactions among member countries without reliance on Western financial institutions.
The system is designed to comply with each member country’s legal and regulatory frameworks, ensuring secure and lawful use.
BRICS Pay will also support digital currencies and stablecoins tied to national currencies. The new global unified digital currency is likely to be compatible with the payment infrastructure.
