In a bid to reshape the global financial landscape and reduce dependency on the US dollar, the BRICS bloc—comprising Brazil, Russia, India, China, and South Africa—has advanced its discussions on establishing a new reserve currency. During the recent BRICS Summit held in Kazan, Russia, leaders explored the potential of a new currency aimed at enhancing economic independence and creating an alternative to the dollar, whose dominance has long underpinned global trade and finance.
The concept of a BRICS reserve currency is underpinned by the bloc’s shared goals of bolstering financial sovereignty, promoting trade among member nations, and limiting the dollar’s influence over global markets. The proposed currency, tentatively named the “Unit,” would be backed by a mix of member nations’ local currencies and gold reserves. This currency, if realized, could enable the BRICS countries to conduct smoother cross-border transactions, foster financial integration, and potentially challenge the dollar’s stronghold in international trade, where it currently accounts for roughly 90 percent of transactions.
At the summit, Russian President Vladimir Putin highlighted the ongoing issue of dollar weaponisation, referring to the US’s use of its currency dominance to impose sanctions and control financial access. However, BRICS leaders clarified that the initiative does not involve rejecting the dollar altogether but aims to create a viable alternative for transactions that may be hindered by dollar-based systems. India emphasized its support for local currency settlements within BRICS, reflecting a growing trend among member states to shift from dollar-dominated trade toward a more diversified system.Proposed structure and function of the BRICS currency
The new currency would serve as a supplementary option for BRICS members, primarily focusing on trade settlements and minimising external risks associated with dollar volatility and political influence. It would be based on a basket of the BRICS nations’ local currencies, with additional support from gold reserves to enhance stability. According to recent developments, the currency could also leverage blockchain and digital technologies to facilitate transparency, security, and seamless cross-border payments.
Supporting this effort, the BRICS bloc is working on a dedicated payment system known as the BRICS Bridge platform, a blockchain-based digital network intended to bypass the dollar-dominated SWIFT system. By establishing this independent cross-border payment system, BRICS aims to simplify trade within the bloc and improve financial accessibility, especially for emerging market economies in the alliance. This platform could eventually support central bank digital currencies (CBDCs) among BRICS members, strengthening the currency’s foundation.
Geopolitical catalysts and growing interest in BRICS+
Growing geopolitical tensions, including the US-China trade war and US sanctions on Russia and Iran, have propelled the BRICS nations to consider de-dollarisation strategies. For instance, in recent years, China and Russia have intensified efforts to trade in their local currencies. The BRICS currency could shield the bloc’s economies from these sanctions and foster resilience in a shifting geopolitical climate.
Interest in the BRICS currency extends beyond the founding members. In recent years, several countries, including Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, have joined the alliance or expressed interest in participating as BRICS+ partners. At the 2024 summit, 13 new nations—including Algeria, Malaysia, and Turkey—were named as partner countries, signaling widespread interest in a diversified financial alternative. Should the BRICS currency succeed, it may serve as a model for other nations seeking to reduce their reliance on the dollar in international transactions.
Implications for the US dollar and global markets
The potential launch of a BRICS currency could significantly impact the US dollar, which remains the world’s leading reserve currency, used in about 88 percent of currency exchanges and 59 percent of central bank reserves. The dollar’s influence has supported the United States’ geopolitical power, but a viable alternative could accelerate the trend toward de-dollarization, reducing the global demand for dollars.
Analysts suggest that if the BRICS currency gains traction, it could weaken the dollar’s role as a benchmark for international trade and finance. Such a shift could lead to a decreased ability for the US to leverage the dollar in imposing economic sanctions, potentially leading to a ripple effect in American markets and affecting households as the currency faces increased competition. Although a significant impact on the dollar remains speculative, the BRICS currency may, over time, encourage other regions to adopt similar reserve structures, gradually altering the balance of power in global markets.
While there is no confirmed timeline for the BRICS currency’s rollout, developments in digital finance are accelerating discussions. The BRICS Bridge payment system could serve as a foundation for interoperable digital transactions, enhancing the currency’s appeal for nations aiming to circumvent the SWIFT system. Additionally, collaborations like Project mBridge—an initiative among the Bank of Thailand, People’s Bank of China, and other partners—showcase ongoing efforts to create a blockchain-based platform where central bank digital currencies could be traded, potentially complementing the BRICS currency’s functionality.
Challenges and future prospects
Despite its potential, the BRICS currency faces challenges, notably the economic diversity among member nations. Disparities in economic size, growth rates, and political systems may complicate unified policies and currency management. Moreover, non-Chinese members may have concerns about increasing dependence on the yuan, given China’s economic weight within the bloc.
However, as the BRICS nations continue to build consensus, the currency could mark a significant step toward a multipolar financial system that enhances economic autonomy for emerging markets. Should the BRICS bloc succeed in creating a resilient currency, it may pave the way for a more balanced international financial order, offering a viable alternative to dollar-dominated global transactions.
