By:Melissa Pistilli,First Published,July 8,2024
The BRICS nations are interested in creating a new currency to compete with the US dollar, and recently announced plans for a blockchain-based payment system. Learn about the developments thus far and how investors can prepare for the possibility.
The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, are looking to establish a new reserve currency backed by a basket of their respective currencies.
The potential BRICS currency would allow these nations to assert their economic independence while competing with the existing international financial system. The current system is dominated by the US dollar, which accounts for about 90 percent of all currency trading. Until recently, nearly 100 percent of oil trading was conducted in US dollars; however, in 2023 one-fifth of oil trades were reportedly made using non-US dollar currencies.
Central to this ongoing situation is the US trade war with China, as well as US sanctions on China and Russia. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what’s known as de-dollarization. In turn, this would have implications for the United States and global economies.
It’s still too early to predict when a BRICS currency will be released, but it’s a good time to look at the potential for a BRICS currency and its possible implications for investors.
Why do the BRICS nations want to create a new currency?
The BRICS nations have a slew of reasons for wanting to set up a new currency. Recent global financial challenges and aggressive US foreign policies have prompted the BRICS countries to explore the possibility. They want to better serve their own economic interests while reducing global dependence on the US dollar and the euro.
When will a BRICS currency be released? There’s no definitive launch date as of yet, but the countries’ leaders have discussed the possibility at length. During the 14th BRICS Summit, held in mid-2022, Russian President Vladimir Putin said the BRICS countries plan to issue a “new global reserve currency,” and are ready to work openly with all fair trade partners.
