The BRICS nations (Brazil, Russia, India, China, and South Africa) are progressing toward establishing an independent financial infrastructure, with a proposed system called ‘BRICS Clear’ at its core. Announced during the recent Kazan Summit, this cross-border settlement and depository platform aims to reduce the bloc’s reliance on the US dollar while countering Western dominance in global financial systems.
BRICS’ motivation stems from its substantial economic contributions—greater than those of G7 nations—contrasted with the Western-controlled financial system. Currently, trade between BRICS countries heavily relies on the US dollar, exposing their economies to global financial shocks and dollar-value fluctuations.
To address these vulnerabilities, BRICS leaders emphasised alternative solutions. Brazilian President Luiz Inácio Lula da Silva proposed local currency-based payment systems to minimize dollar dependency. Russian President Vladimir Putin highlighted the need for BRICS’ financial infrastructure to stabilize international transactions and strengthen member economies.
Notably, by 2023, approximately 20% of oil trade within BRICS countries was conducted in non-dollar currencies, signaling a tangible shift toward financial independence.
Features of BRICS Clear
BRICS Clear aims to enable seamless cross-border settlements and depository services among member nations. This infrastructure will operate alongside existing financial initiatives such as China’s Cross-Border Interbank Payment System (CIPS) and Russia’s digital payment networks. Discussions also included creating a BRICS reinsurance company to enhance economic resilience and expanding the New Development Bank (NDB) into a leading multilateral development institution.
The Kazan Summit, which welcomed new members like Egypt, Ethiopia, Iran, and the UAE, reinforced BRICS’ broader ambition to create a multilateral platform free from Western influence.
BRICS’ plan underscores concerns about the dominance of the US dollar, with approximately $13 trillion in circulation globally. Despite the widespread use of dollar-denominated transactions, many restricted US entities exploit loopholes to conduct opaque financial activities through intermediaries. BRICS envisions a transparent and stable financial infrastructure to counter these practices.
Implications for investors
If successful, BRICS Clear could offer a secure and efficient alternative for global investors, reducing risks tied to dollar dependency. The introduction of a cryptocurrency-based payment system, as discussed, could further enhance transparency and cost efficiency in international transactions.
The initiative is also poised to boost sectors such as technology, cloud payments, and renewable energy, potentially increasing their share in BRICS nations’ market capitalisation from 2% to 25%.
