{"id":13677,"date":"2025-01-07T02:53:06","date_gmt":"2025-01-07T02:53:06","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2025\/01\/07\/how-would-a-new-brics-currency-affect-the-us-dollar-updated-2025\/"},"modified":"2025-01-07T02:53:06","modified_gmt":"2025-01-07T02:53:06","slug":"how-would-a-new-brics-currency-affect-the-us-dollar-updated-2025","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2025\/01\/07\/how-would-a-new-brics-currency-affect-the-us-dollar-updated-2025\/","title":{"rendered":"How Would a New BRICS Currency Affect the US Dollar? (Updated 2025)"},"content":{"rendered":"<\/p>\n

The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, have had many discussions about establishing a new reserve currency backed by a basket of their respective currencies. <\/strong><\/p>\n

A BRICS currency was a topic at the \t2024 BRICS Summit that took place October 22 to 24 in Kazan, Russia. At the summit, the BRICS nations continued their discussions of creating a potentially gold-backed currency, known as the \u2018Unit,\u2019 as an alternative to the US dollar.<\/p>\n

\tThe potential BRICS currency would allow these nations to assert their economic independence while competing with the existing international financial system. The current system is \tdominated 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. <\/p>\n

\tCentral 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\u2019s known as \tde-dollarization. In turn, this would have implications for the United States and global economies.<\/p>\n

Another factor is former US president Donald Trump returning for a second term beginning on January 20. Trump\u2019s America-first policies are expected to drive up the value of the dollar compared to its global counterparts, as was already on display the day following his election win on November 5 as China\u2019s yuan, Russia\u2019s ruble, Brazil\u2019s real, India\u2019s rupee and South Africa\u2019s rand all fell. This could in turn push these BRICS member nations to look for new paths to move away from the US dollar.<\/p>\n

\tAt the 2024 BRICS summit, \tRussian President Vladimir Putin appeared on stage holding what appeared as a prototype of a possible BRICS banknote. However, he seemed to back away from previous aggressive calls for de-dollarization, stating the goal of the BRICS member nations is not to move away from the US dollar-dominated SWIFT platform, but rather to deter the \u2018weaponization\u2019 of the US dollar by developing alternative systems for using local currencies in financial transactions between BRICS countries and with trading partners.<\/p>\n

\t\u2018We are not refusing, not fighting the dollar, but if they don\u2019t let us work with it, what can we do? We then have to look for other alternatives, which is happening,\u2019 he stated.<\/p>\n

\tIt\u2019s still too hard to predict if and when a BRICS currency will be released in 2025 or beyond, but it\u2019s a good time to look at the potential for a BRICS currency and its possible implications for investors.<\/p>\n

\n

In this article <\/h3>\n<\/div>\n
\n

Why do the BRICS nations want to create a new currency? <\/h3>\n

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. <\/span><\/p>\n

When will a BRICS currency be released? There\u2019s no definitive launch date as of yet, but the countries\u2019 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 \u2018new global reserve currency,\u2019 and are ready to work openly with all fair trade partners.<\/p>\n

In April 2023, Brazilian President Luiz Inacio Lula da Silva showed support for a BRICS currency, commenting, \u201cWhy can\u2019t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries? Who decided that the dollar was the (trade) currency after the end of gold parity?\u201d<\/p>\n

In the lead up to the 2023 BRICS Summit last August, there was speculation that an announcement of such a currency could be on the table. This proved to be wishful thinking, however.<\/p>\n

\u2018The development of anything alternative is more a medium to long term ambition. There is no suggestion right now to creates a BRICS currency,\u2019 Leslie Maasdorp, CFO of the New Development Bank, told Bloomberg at the time. The bank represents the BRICS bloc.<\/p>\n

<\/span>South Africa\u2019s BRICS ambassador, Anil Sooklal, has said as many as 40 countries have expressed interest in joining BRICS. At the 2023 BRICS Summit, six countries were invited to become BRICS members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. All but Argentina officially joined the alliance in January 2024.<\/p>\n

At the 2024 BRICS Summit, 13 nations signed on as BRICS partner countries (not yet full-fledged members): Algeria, Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, Vietnam and Uzbekistan.<\/p>\n

In recent years, the US has placed numerous sanctions on Russia and Iran. The two countries are working together to bring about a BRICS currency that would negate the economic impacts of such restrictions, according to Iranian Ambassador to Russia Kazem Jalal, speaking at a press conference during the Russia\u2013Islamic World: KazanForum in May 2024.<\/p>\n

Some experts believe that a BRICS currency is a flawed idea, as it would unite countries with very different economies. There are also concerns that non-Chinese members might increase their dependence on China\u2019s yuan instead. That said, when Russia demanded in October 2023 that India pay for oil in yuan as Russia is struggling to use its excess supply of rupees. However, India refused to use anything other than the US dollar or rupees to pay.<\/p>\n<\/div>\n

\n

What would the advantages of a BRICS currency be? <\/h3>\n

A new currency could have several benefits for the BRICS countries, including more efficient cross-border transactions and increased financial inclusion. By leveraging blockchain technology, digital currencies and smart contracts, the currency could revolutionize the global financial system. Thanks to seamless cross-border payments, it could also promote trade and economic integration among the BRICS nations and beyond.<\/p>\n

A new BRICS currency would also:<\/p>\n

Strengthen economic integration within the BRICS countries
\nReduce the influence of the US on the global stage
\nWeaken the standing of the US dollar as a global reserve currency
\nEncourage other countries to form alliances to develop regional currencies
\nMitigate risks associated with global volatility due to unilateral measures and the diminution of dollar dependence<\/p>\n<\/div>\n

\n

What is Donald Trump\u2019s stance on a BRICS currency? <\/h3>\n

US President-elect Donald Trump has not been shy about upping the ante on American protectionism with his plans to slap tariffs on imported goods beginning this year. During the first US Presidential Debate between him and Vice President Kamala Harris on September 10 last year, Trump doubled down on his pledge to impose strict tariffs on nations seeking to move away from the US dollar as the global currency.<\/p>\n

He is taking a particularly strong stance against China, threatening to implement 60 percent to 100 percent tariffs on Chinese imports, although these hefty tariffs would be paid by American companies and consumers purchasing Chinese products, not by China itself.<\/p>\n

In early December, Trump posted an even more direct threat to BRICS nations on the social media platform Truth Social. \u201cWe require a commitment from these countries that they will neither create a new Brics currency nor back any other currency to replace the mighty US dollar or they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy,\u201d he wrote.<\/p>\n

In response to Trump demanding a \u2018commitment\u2019 from BRICS nations not to challenge the supremacy of the US dollar, Kremlin spokesperson Dmitry Peskov sounded less than threatened. \u2018More and more countries are switching to the use of national currencies in their trade and foreign economic activities,\u2019 said Peskov, per Reuters. \u2018If the U.S. uses force, as they say economic force, to compel countries to use the dollar it will further strengthen the trend of switching to national currencies (in international trade).\u2019<\/p>\n<\/div>\n

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How would a new BRICS currency affect the US dollar? <\/h3>\n

<\/small><\/p>\n

RomanR \/ Shutterstock<\/em><\/p>\n

For decades, the US dollar has enjoyed unparalleled dominance as the world\u2019s leading reserve currency. According to the US Federal Reserve, between 1999 and 2019, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79 percent in the rest of the world. <\/p>\n

According to the Atlantic Council, the US dollar is used in approximately 88 percent of currency exchanges, and 59 percent of all foreign currency reserves held by central banks. Due to its status as the most widely used currency for conversion and its use as a benchmark in the forex market, almost all central banks worldwide hold dollars. Additionally, the dollar is used for the vast majority of oil trades.<\/p>\n

Although the dollar\u2019s reserve currency share has decreased as the euro and yen have gained popularity, the dollar is still the most widely used reserve currency, followed by the euro, the yen, the pound and the yuan. <\/p>\n

The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar\u2019s dominance. However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar\u2019s value. It could also cause an economic crisis affecting American households. Aside from that, this new currency could accelerate the trend toward de-dollarization. <\/p>\n

Nations worldwide are seeking alternatives to the US dollar, with examples being China and Russia trading in their own currencies, and countries like India, Kenya and Malaysia advocating for de-dollarization or signing agreements with other nations to trade in local currencies or alternative benchmarks.<\/p>\n

While it is unclear whether a new BRICS currency would inspire the creation of other US dollar alternatives, the possibility of challenging the dollar\u2019s dominance as a reserve currency remains. And as countries continue to diversify their reserve holdings, the US dollar could face increasing competition from emerging currencies, potentially altering the balance of power in global markets.<\/p>\n

However, a recent study by the Atlantic Council\u2019s GeoEconomics Center released in June 2024 shows that the US dollar is far from being dethroned as the world\u2019s primary reserve currency. <\/p>\n

\u2018The group\u2019s \u2018Dollar Dominance Monitor\u2019 said the dollar continued to dominate foreign reserve holdings, trade invoicing, and currency transactions globally and its role as the primary global reserve currency was secure in the near and medium term,\u2019 reported Reuters. <\/p>\n

Ultimately, the impact of a new BRICS currency on the US dollar will depend on its adoption, its perceived stability and the extent to which it can offer a viable alternative to the dollar\u2019s longstanding hegemony.<\/p>\n<\/div>\n

\n

Will BRICS have a digital currency? <\/h3>\n

BRICS nations do not as of yet have their own specific digital currency, but a BRICS blockchain-based payment system is in the works, according to Kremlin aide Yury Ushakov in March 2024. Known as the BRICS Bridge multisided payment platform, it would connect member states\u2019 financial systems using payment gateways for settlements in central bank digital currencies.<\/p>\n

The planned system would serve as an alternative to the current international cross-border payment platform, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, which is dominated by US dollars. <\/p>\n

<\/span>\u201cWe believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain. The main thing is to make sure it is convenient for governments, common people and businesses, as well as cost-effective and free of politics,\u201d Ushakov said in an interview with Russian news agency TASS.<\/p>\n

Another dollar-alternative digital currency cross-border payment system in the works is Project mBridge, under development via a collaboration between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People\u2019s Bank of China and the Central Bank of the United Arab Emirates. Saudi Arabia has also recently decided to join the project. The central bank digital currencies traded on the platform would be backed by gold and local currencies minted in member nations. <\/p>\n

In June 2024, Forbes reported that the mBridge platform had reached a significant milestone by completing its minimal viable product stage (MVP). The MVP platform can undertake real-value transactions (subject to jurisdictional preparedness) and is compatible with the Ethereum Virtual Machine (EVM), a decentralized virtual environment that executes code consistently and securely across all Ethereum nodes,\u2019 stated the publication. \u2018MVP thus is suitable as a testbed for new use cases and interoperability with other platforms.\u2019<\/p>\n

<\/strong>\u2018(New Development Bank President Dilma Rousseff) came out and publicly said that there has been an agreement in principle to use a new settlement currency called the Unit, which will be backed 40 percent by gold and 60 percent by the local currencies in the BRICS union \u2014 the BRICS+ countries. That gold will be in the form of kilo bars and will be deliverable or redeemable for those entities,\u2019 Schectman said.<\/p>\n

\u2018The basket of gold and the basket of currencies will be minted in the member countries \u2026 it will be put into an escrow account, taken off the ledger so to speak \u2014 off of their balance sheet and put onto the mBridge ledger, and held in an escrow account in their own borders. It doesn\u2019t need to be sent to a central authority.\u2019<\/p>\n<\/div>\n

<\/span><\/div>\n
\n

How would a BRICS currency impact the economy? <\/h3>\n

A potential shift toward a new BRICS currency could have significant implications for the North American economy and investors operating within it. Some of the most affected sectors and industries include:<\/p>\n

Oil and gas
\nBanking and finance
\nCommodities
\nInternational trade
\nTechnology
\nTourism and travel
\nThe foreign exchange market<\/p>\n

A new BRICS currency would also introduce new trading pairs, alter currency correlations and affect market volatility, requiring investors to adapt their strategies accordingly.<\/p>\n<\/div>\n

\n

How can investors prepare for a new BRICS currency? <\/h3>\n

Adjusting a portfolio in response to emerging BRICS currency trends may be a challenge for investors. However, several strategies can be adopted to capitalize on these trends.<\/p>\n

Invest in commodities like gold and silver as a hedge against currency risk.
\nGain exposure to BRICS equity markets through stocks and ETFs that track BRICS market indexes.
\nConsider alternative investments such as real estate or private equity in the BRICS countries.<\/p>\n

Prudent investors will also weigh these strategies against their exposure to market, political and currency fluctuations.<\/p>\n

In terms of investment vehicles, investors could consider ETFs such as the iShares MSCI BIC ETF (ARCA:BKF) or the Pacer Emerging Markets Cash COW 100 ETF (NASDAQ:ECOW). They could also invest in mutual funds such as the T. Rowe Price Emerging Markets Equity Fund, or in individual companies within the BRICS countries.<\/p>\n

Simply put, preparing for a new BRICS currency or potential de-dollarization requires careful research and due diligence by investors. Diversifying currency exposure, and investing in commodities, equity markets or alternative investments are possible options to consider while being mindful of the associated risks.<\/p>\n<\/div>\n

\n

Investor takeaway <\/h3>\n

While it is not certain whether the creation of a BRICS reserve currency will come to pass, its emergence would pose significant implications for the global economy and potentially challenge the US dollar\u2019s dominance as the primary reserve currency. This development would present unique investment opportunities, while introducing risks to existing investments as the shifting landscape alters monetary policy and exacerbates geopolitical tensions. <\/p>\n

For those reasons, investors should closely monitor the progress of a possible BRICS currency. And, if the bloc does eventually create one, it will be important watch the currency\u2019s impact on BRICS member economies and the broader global market. Staying vigilant will help investors to capitalize on growth prospects and hedge against potential risks.<\/p>\n<\/div>\n

\n

FAQs for a new BRICS currency<\/strong><\/h3>\n<\/div>\n
\n

Is a BRICS currency possible? <\/h3>\n

Some financial analysts point to the creation of the euro in 1999 as proof that a BRICS currency may be possible. However, this would require years of preparation, the establishment of a new central bank and an agreement between the five nations to phase out their own sovereign currencies; it would most likely also need the support of the International Monetary Fund to be successful internationally. <\/p>\n

The impact of its war on Ukraine will continue to weaken Russia\u2019s economy and the value of the ruble, and China is intent on raising the power of the yuan internationally. There is also a wide chasm of economic disparity between China and other BRICS nations. These are no small obstacles to overcome. <\/p>\n<\/div>\n

\n

Would a new BRICS currency be backed by gold? <\/h3>\n

Additionally, speaking at this year\u2019s New Orleans Investment Conference, well-known author Jim Rickards gave a detailed talk on how a gold-backed BRICS currency could work. He suggested that if a BRICS currency unit is worth 1 ounce of gold and the gold price goes to US$3,000 per ounce, the BRICS currency unit would be worth US$3,000, while the dollar would lose value compared to the BRICS currency as measured by the weight of gold.<\/p>\n

Importantly though, he doesn\u2019t see this as a new gold standard, or the end of the US dollar or the euro. <\/p>\n

\u201c(With) a real gold standard, you can take the currency and go to any one of the central banks and get some gold,\u201d Rickards said at the event. \u201cWith BRICS they don\u2019t have to own any gold, they don\u2019t have to buy any gold, they don\u2019t have to prop up the price. They can just rise on the dollar gold market.\u2019<\/p>\n<\/div>\n

\n

How much gold do the BRICS nations have? <\/h3>\n

As of Q3 2024, the combined central bank gold holdings of the original BRICS nations plus Egypt (the only nation of the five new additions to have central bank gold reserves) accounted for more than 20 percent of all the gold held in the world\u2019s central banks. Russia, India and China rank in the top 10 for central bank gold holdings. <\/p>\n

Russia controls 2,335.85 metric tons (MT) of the yellow metal, making it the fifth largest for central bank gold reserves. China follows in the sixth spot with 2,264.32 MT of gold and India places eighth with 853.63 MT. Brazil and South Africa\u2019s central bank gold holdings are much smaller, coming in at 129.65 MT and 125.44 MT, respectively. New BRICS member Egypt\u2019s gold holdings are equally small, at 126.82 MT.<\/p>\n<\/div>\n

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article. <\/strong><\/p>\n

<\/div>\n<\/p>\n
This post appeared first on investingnews.com<\/div>\n","protected":false},"excerpt":{"rendered":"

The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, have had many discussions about establishing a new reserve currency backed by a basket of their respective currencies. A BRICS currency was a topic at the 2024 BRICS Summit that took place October 22 to 24 in Kazan, Russia. At the summit, […]<\/p>\n","protected":false},"author":0,"featured_media":13678,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-13677","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/13677","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=13677"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/13677\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/13678"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=13677"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=13677"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=13677"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}