- The BRICS (Brazil, Russia, India, China, and South Africa) alliance, soon to be BRICS+, is set to release a new gold-backed currency, a seismic shift in global finance which may eventually challenge the dominance of the US Dollar.
- The new BRICS+ currency could accelerate the shift away from the Dollar, providing an alternative payment medium for international trade and creating a large bond market that could rival US Treasuries.
As a financial analyst specializing in blockchain technology, I have been closely following the development of this impending shift. The BRICS alliance is about to ignite a monumental change in global finance. The new currency’s launch, scheduled for August 2023, could disrupt the US Dollar’s long-standing dominance, making this potentially the most impactful event in international finance since the end of the gold standard in 1971.
The Emergence of BRICS+
In recent years, BRICS has been moving towards a substantial expansion, leading to its proposed rebranding as BRICS+. Numerous nations have expressed their interest in joining, and eight have formally applied for membership, including Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates.
BRICS+ brings under one roof some of the world’s largest energy producers, countries with the most significant landmass, and nations holding vast quantities of the world’s essential resources. Notably, BRICS nations hold almost 50% of the world’s wheat and rice production and 15% of global gold reserves.
The group’s GDP combined makes up 28% of the nominal global GDP, and when using purchasing power parity, it jumps to over 54%. The sheer scale and potential of BRICS+ positions them as a formidable alternative to Western financial hegemony.
Shifting Away from the Dollar
The new BRICS+ currency, expected to be primarily digital and operating on a permissioned ledger, seeks to challenge the US Dollar’s role as the global payment and reserve currency. What’s been pushing this movement? It’s largely a reaction to the US’s frequent weaponization of the Dollar via sanctions.
Countries that have faced or fear these sanctions, such as Russia, China, Iran, Turkey, Saudi Arabia, and Argentina, are looking to opt out of the Dollar system entirely. The BRICS+ currency presents a practical route to de-Dollarizing global payments and eventually global reserves.
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The Power of a Gold-Backed Currency
Unlike most analyses that claim the death of the Dollar as a reserve currency, it’s essential to distinguish between payment and reserve currencies. Countries are free to trade in any payment currency they choose; however, reserve currencies are a different matter. They represent the savings accounts of sovereign nations earned through trade surpluses and are typically held in the form of securities.
Currently, 60% of global reserves are held in US Treasury securities, denominated in Dollars. For any currency to pose a serious challenge as a reserve currency, it needs to be backed by a large, liquid sovereign bond market, a position currently held almost unchallenged by the US.
This is where the genius of the BRICS+ currency comes in. It offers the opportunity to create a bond market from scratch, bypassing the necessity of challenging US Treasury bonds head-on. By leveraging the patriotism of their own citizens and encouraging retail investments in BRICS+ instruments, these nations can rapidly create a bond market that absorbs surpluses generated through world trade in the BRICS+ currency.
The Dawn of a New Financial Era
This dramatic turn of events—the introduction of a new gold-backed currency, its rapid adoption as a payment currency, and its eventual use as a reserve asset currency—will commence on August 22, 2023, in Durban, South Africa, at the annual BRICS Leaders’ Summit Conference.
While the world has been relatively oblivious to this tectonic shift, the introduction of the new BRICS+ currency will undoubtedly send shockwaves through the international monetary system, sparking a revolution in global finance.
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