BRICS Settlement System Challenges Dollar Dominance with 159 Countries on Board

• BRICS unveiled a mock-up of its anticipated currency at the Kazan summit.

• The currency, aimed at reducing reliance on the U.S. dollar, may use a mix of gold and member currencies for backing.

A mock-up of the anticipated BRICS currency was showcased at the alliance’s ongoing summit in Kazan, Russia. Russian President Vladimir Putin presented a “BRICS bill” that shows the flags of the five countries: Brazil, Russia, India, China, and South Africa connected as one. The displayed currency seemed to be a note of 100 with some flags at the back, which may indicate the interest of countries like Mexico, Egypt, Nigeria, and Bahrain.

JUST IN: Russian President Putin has been gifted a mock-up of a "BRICS bill" at BRICS summit in Kazan. pic.twitter.com/gP08KKkRUy

— BRICS News (@BRICSinfo) October 23, 2024

Although the BRICS countries are yet to set an official date for the introduction of this new currency, it has been among their top agenda for discussions for years now. Chinese President Xi Jinping also noted the significance of the BRICS new payment system at the summit.  He stated that the alliance seeks a multipolar financial system, emphasizing that “there is an urgent need to reform the international financial architecture.” 

De-Dollarization and the BRICS Pay System

At the core of the proposed BRICS currency is a BRICS pay system based on blockchain technology as a step toward de-dollarization.  This platform could enable BRICS countries to avoid relying on Western financial systems such as the SWIFT payment system, thereby increasing the financial stability of the member countries. The pay system is consistent with the recent strategies adopted by the block to reduce reliance on the US dollar, where the currency is seen as a tool of trade among the BRICS countries and may extend to other regions.

Speculations have also emerged on the basis of the currency that it will be supported by a basket of 40% gold and 60% local currencies from member countries, including the Chinese yuan, Russian ruble and Indian rupee. It will also give the currency a definite value and make it fall in line with the international economic systems, which is something that the bloc wants in its quest to establish the political and economic order of the world.

Challenges Ahead as Expert Questions BRICS Currency Success

Despite the recent launch of the BRICS currency model, critics have doubted the ability of the currency to rule the world. Jim O Neill, a former Goldman Sachs chief economist who initiated the term “BRICS,” has doubts over the success capability of the currency.

 In an interview, O’Neill was quick to point out the existing tensions within the bloc and implied that internal rifts may well pose difficulties for the currency’s progress. He mentioned existing conflicts, such as China and India, over territorial claims that he said would hinder the bloc from achieving the required level of cooperation.

O’Neill also made additional remarks on what the group has been able to achieve over the past fifteen years; BRICS has only been moderately effective at promoting its economic power on the international stage. He stated that real partnership, particularly China and India, would be critical for BRICS to attain a much stronger position within the global financial system. 

Additionally, recently at the BRICS summit, it was confirmed that no new countries will be admitted into the BRICS this year as its full member. Although there had been talks and rumours about the group expanding its member list, the group decided to stay with nine members.