BRICS new currency? Potential impact on the Dollar

For many years, the US dollar has served as the standard for international trade. The creation of a new currency, however, has been discussed recently in an effort to replace the dollar and challenge American hegemony. De-dollarisation has gained momentum recently, notably since the start of the Russia-Ukraine war in February. The deputy chairman of the State Duma, Alexander Babakov, was cited as stating that the BRICS (an acronym for five leading emerging economies: Brazil, Russia, India, China, and South Africa) countries are developing a new payment system based on a plan that "does not defend the dollar or euro." This gave more momentum to the campaign. Vladimir Putin, the president of Russia, mentioned the development of a new global reserve currency in a recent speech to the BRICS Business Forum. This global reserve currency is expected to replace the Special Drawing Right of the International Monetary Fund and include the national currencies of the BRICS member states (SDR). Putin's announcement has highlighted the significance of acknowledging the diverse motivations of the BRICS nations to not only facilitate intra-BRICS trade in local currencies but also firewall their global financial interests at a time when Russia is facing unprecedented global sanctions in the wake of the invasion of Ukraine.

Russian envoy Knyazev claims that the single currency's purpose is to "cut reliance on the Western financial system." Prior to the projected creation of a single BRICS currency, the member nations are already trading more and more in their own national currencies, displacing the dollar's long-standing role as the worldwide unit of measurement for the value of goods and other currencies. Not just BRICS are considering the de-dollarisation objective. The Shanghai Cooperation Organisation (SCO) is moving toward currency exchange among its member nations. Notably, many members of the SCO, an economic group with eight members, are seeking to join the BRICS.

The SCO consists of the following nations: Russia, China, India, Pakistan, Iran, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The ASEAN and CIS trade blocs also include 13 other nations. Bakhtiyer Khakimov, the Russian presidential envoy to the SCO, acknowledges that the process is slow. He stressed that "the roadmap for the gradual increase in the share of national currencies in mutual settlements has been adopted and clearly spells out all the stages," saying "This is not an easy task." Although he acknowledges that he does not believe the process will be hurried, he nonetheless wants all parties affected to know that "the intention is serious."

The BRICS countries' economies might be stabilised if they move forward with their plan and create a new currency. It would translate into more consumer confidence for an investment in the BRICS nations. Spending would increase, and the economy would expand as a result. Will India, for instance, embrace this new currency? Will it desire to connect itself economically with China, with whom it is currently engaged in a confrontation at the border? Additionally, according to some observers, Beijing may gain more from this new agreement than New Delhi. It's unclear what will happen next. But it is undeniable that the dollar is weakening.