- The nations of Brazil, Russia, India, China, and South Africa, known as BRICS, are considering the creation of a joint currency.
- The joint currency discussion shows BRICS countries’ drive to explore new methods to reshape international affairs and effectively coordinate policies.
The idea of a joint currency by the BRICS nations, an acronym for Brazil, Russia, India, China, and South Africa, isn’t expected to oust the dollar’s preeminence any time soon. However, it is indicative of an escalating challenge to the extant economic world order. The BRICS leaders, convening in South Africa in August 2023, will deliberate over this new currency proposition, signaling a shift in the geopolitical landscape.
With international transactions majorly conducted in US dollars and forming 58% of global foreign exchange reserves, the dollar’s supremacy is undeniable. However, de-dollarization – reducing an economy’s reliance on the dollar for global trade and finance – has gained momentum, especially after the Russian invasion of Ukraine.
The BRICS nations have been progressively decreasing their dollar dependence. This is observable in Russia, China, and Brazil’s increasing usage of non-dollar currencies in their cross-border transactions. Moreover, central banks are looking to diversify their currency reserves away from the dollar and into gold.
Creating a joint BRICS currency faces considerable challenges. Nevertheless, these discussions illustrate the bloc’s intent to formulate novel ideas to stir international affairs and effectively synchronize policies around these ideas.
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The aspiration behind the joint currency initiative appears to be the establishment of an efficient, integrated payment system for cross-border transactions. An already existing foundation includes the BRICS Interbank Cooperation Mechanism, launched in 2010, to facilitate cross-border payments in local currencies. There is also a movement towards developing a BRICS cryptocurrency and harmonizing the growth of Central Bank Digital Currencies to boost currency interoperability and economic integration.
While efforts towards de-dollarization have encountered various obstacles, the BRICS group’s determination to act is noteworthy. Despite numerous differences among the five countries, the bloc has managed to formulate joint policies, withstand major crises, and deepen its cooperation. It now boasts a vast network of interlinked mechanisms that bind governmental officials, businesses, academics, think tanks, and other stakeholders across countries.
Undoubtedly, the conversation about a new BRICS currency serves as a significant sign of numerous nations’ desire to diversify away from the dollar. Yet, it’s essential not to miss the broader picture – a new global economic order won’t emerge from an overnight de-dollarization or a new BRICS currency. Instead, it might potentially stem from the BRICS’ commitment to coordinating their policies and innovating, which this currency initiative represents.
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