TLDR:
- BRICS alliance expands to 10 nations while developing new financial infrastructure
- New payment system aims to reduce reliance on US dollar-based SWIFT
- Proposed “Unit” currency could combine gold and local currency backing
- Over 13 additional countries have joined as BRICS partners
- Central banks of BRICS nations hold 20% of global gold reserves
The BRICS economic alliance doubled its membership in January 2024, marking a major expansion that aligns with the group’s plans to create new financial systems. Egypt, Iran, the UAE, Saudi Arabia, and Ethiopia joined the original members Brazil, Russia, India, China, and South Africa, bringing fresh momentum to the bloc’s financial initiatives.
In a recent development at the October 2024 BRICS Summit in Kazan, Russia, member nations outlined plans for a blockchain-based payment platform. This system, called BRICS Bridge, aims to provide an alternative to traditional banking networks for cross-border transactions.
Russian President Vladimir Putin presented what observers described as a sample BRICS banknote during the summit. He clarified the group’s position, stating, “We are not refusing, not fighting the dollar, but if they don’t let us work with it, what can we do? We then have to look for other alternatives, which is happening.”
The proposed payment system would use central bank digital currencies and incorporate new technology to process transactions between member states. Kremlin aide Yury Ushakov explained in March that the system prioritizes user-friendly features for governments, businesses, and individuals while maintaining cost efficiency.
BRICS’ potential new currency, dubbed the “Unit,” could combine gold and local currency backing in its structure. According to recent statements from the New Development Bank, the currency might be backed 40% by gold stored in member nations and 60% by local currencies from BRICS+ countries.
The alliance’s combined gold reserves add weight to these plans. BRICS central banks, including new member Egypt, control more than one-fifth of global central bank gold holdings. Russia leads with 2,335.85 metric tons, followed closely by China at 2,264.32 metric tons and India with 840.76 metric tons.
Current statistics show the US dollar’s ongoing influence in global trade. The currency appears in 88% of foreign exchange transactions and makes up 59% of central bank reserves worldwide. However, changes are emerging – notably, non-dollar currencies handled one-fifth of oil trades in 2023.
A parallel initiative called Project mBridge achieved technical milestones in June 2024. This system, developed by central banks from China, Hong Kong, Thailand, and the UAE, with Saudi Arabia joining recently, completed its minimal viable product phase. The platform can now process real-value transactions and works with Ethereum-based systems.
The expansion of BRICS continues beyond full membership. Thirteen nations, including Algeria, Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, Vietnam, and Uzbekistan, have become BRICS partner countries, showing growing interest in the bloc’s financial plans.
Russian Deputy Foreign Minister Mikhail Bogdanov addressed concerns about the initiative’s goals. He emphasized that BRICS seeks to enhance member nations’ sovereignty rather than oppose Western systems. The focus remains on developing alternative financial methods rather than replacing existing ones entirely.
These developments occur against a backdrop of international trade tensions. India recently declined to use Chinese yuan for Russian oil payments, highlighting the challenges of shifting away from dollar-based trade. US presidential campaign discussions have also touched on these changes, with proposals for new tariffs on nations moving away from dollar-based trade.
The Kazan Declaration, adopted at the recent summit, maps out BRICS’ approach to international issues and financial cooperation. Member states agreed to promote local currency use and develop new payment structures while maintaining existing trade relationships.
Technical aspects of the new systems focus on practical implementation. The BRICS Bridge platform aims to connect member states’ financial systems through payment gateways that can handle digital currencies. This infrastructure would allow for direct settlements between members without relying on external systems.
Recent analysis from the Atlantic Council suggests these changes may take time to impact global trade. Their June 2024 “Dollar Dominance Monitor” report indicates that the US dollar maintains its leading position in international finance for the immediate future.
Plans for the proposed Unit currency include using gold bars stored within member nations. These reserves would be placed in escrow accounts within each country’s borders rather than transferred to a central location. This approach aims to maintain national control over assets while supporting the new currency system.
The BRICS Summit demonstrated the practical progress of these initiatives. Member nations reviewed technical specifications for the payment platform and discussed implementation timelines. Working groups continue to address technical challenges and regulatory requirements for the new systems.
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