Leaders View On BRICS Currency & Can It Become A Reality?
16 November 2023, 3 min read
A new currency could have several benefits for the BRICS countries, including more efficient cross-border transactions and increased financial inclusion. By leveraging blockchain technology, digital currencies and smart contracts, the currency could revolutionize the global financial system.
What is BRICS ?
BRICS is an intergovernmental organization comprising Brazil, Russia, India, China, and South Africa. In 2010, it formed by adding South Africa to its predecessor called BRIC.
BRICS nations said they want to use their national currencies more instead of the dollar by creating BRICS currency which will be an alternative to the US Dollar.
Brazil’s President Luiz Inacio Lula da Silva on August 23, 2023 called for the BRICS nations to create a common currency. The objective is for trade and investment between each other, as a means of reducing their vulnerability to dollar exchange rate fluctuations.
BRICS leaders said they want to use their national currencies more instead of the dollar.
Advantages of BRICS Currency:
A new currency could have several benefits for the BRICS countries, including more efficient cross-border transactions and increased financial inclusion. In other words, leveraging blockchain technology, digital currencies and smart contracts, the currency could revolutionize the global financial system. Also, it could promote trade and economic integration among the BRICS nations and beyond.
How will the US dollar be impacted by the new BRICS currency ?
The US dollar dominates over 74 percent of all international trade, handles around 90 percent of currency exchanges, facilitates nearly 100 percent of oil trades, and represents just under 60 percent of all foreign currency reserves held by central banks. Due to its status as the most widely used currency for conversion and its use as a benchmark in the forex market, almost all central banks worldwide hold dollars. The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar’s dominance.
However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar’s value. Ultimately, the impact of a new BRICS currency on the US dollar will depend on its adoption, its perceived stability and the extent to which it can offer a viable alternative to the dollar’s long standing hegemony, according to media reports.
BRICS Nations Leaders on New Currency
India’s View: No plans for BRICS currency
External Affairs Minister, S. Jaishankar said that India has no plans for a BRICS currency. Meanwhile, he emphasized that India aims to strengthen its national currency, the rupee, with making the local currency stronger being the top priority for the Indian government.
China’s View: Would push other countries to join the bloc, accept the soon-to-be-released currency
China remains the main force driving the BRICS expansion process with the intention of dethroning the US dollar. The Chinese government is pushing nations around the world to join the bloc and accept the soon-to-be-released currency.
Brazil’s Take: BRICS currency increases payment options and reduces vulnerabilities
Brazil’s president doesn’t believe nations that do not use the dollar should be forced to trade in the currency, and he has also advocated for a common currency in the Mercosur bloc of South American countries.
A BRICS currency “increases our payment options and reduces our vulnerabilities,” he said.
South Africa: Need discipline mechanism for countries that fall out of line with it and a common central bank
Building a BRICS currency would be a political project, said South African Central Bank Governor Lesetja Kganyago, according to a Reuters report.
“If you want it, you’ll have to get a banking union, you’ll have to get a fiscal union, you’ve got to get macroeconomic convergence,” Kganyago said.
“Importantly, you need a discipline mechanism for the countries that fall out of line with it… Plus they will need a common central bank… where does it get located?”
Russia’s View: Would discuss switching trade between member countries away from the dollar to national currencies
Russian President Vladimir Putin said he would discuss switching trade between member countries away from the dollar to national currencies while China has not commented on the idea.
The US dollar still dominates global trade. It is on one side of almost 90 per cent of global forex transactions, according to Bank of International Settlements Data. De-dollarisation would need countless exporters and importers, as well as borrowers, lenders and currency traders across the world, to independently decide to use other currencies.
If the BRICS replaces the dollar as the reserve currency of the BRICS, the reactions will be varied and bizarre. Either way, the dollar’s reign isn’t likely to end overnight, but a BRICS currency would begin the slow erosion of the dollar’s dominance.
Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as investment or trading advice. The author is not a financial advisor and does not have any professional qualifications in this area. The author does not guarantee the accuracy or completeness of the information provided. Any action you take based on the information in this blog post is done at your own risk. Please consult with a financial advisor before making any investment decisions.
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