By Jessica Lam
In a bold move to reduce reliance on the US dollar and reshape the global financial landscape, the BRICS (Brazil, Russia, India, China & South Africa) nations have unveiled ambitious plans for a new multilateral digital payment platform and block chain-based settlement system. This strategic initiative aims to unify the financial markets of member states, facilitate cross-border trade and commerce, and ultimately challenge the dominance of Western-led monetary frameworks.
The BRICS association, which now includes the expanded membership of Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE in addition to the original Brazil, Russia, India, China, and South Africa, is looking to strengthen financial cooperation and resilience through innovative payment mechanisms. As of January 2024, the BRICS+ group represents around 40% of crude oil production and exports, while accounting for one-quarter of global GDP (Gross Domestic Product) and nearly half the world population.
The BRICS Bridge Platform
The aptly named “BRICS Bridge” platform designed to enable transactions in national currencies rather than the US dollar, provides cost-effective and politically neutral solutions for governments, businesses, and individuals alike. “By promoting settlements in national currencies, the BRICS Bridge will reduce our members’ dependence on the dollar-dominated financial system,” stated Indian Finance Minister Nirmala Sitharaman. This initiative is part of a broader agenda to enhance the role of member countries in the international monetary and financial system, as emphasized by Kremlin aide Yury Ushakov, who noted that the payment systems would be “politics-free” and aimed at facilitating trade within the bloc[1][3].
Complementing the BRICS Bridge is the development of a block chain – based payment system. Leveraging cutting-edge digital currency and block chain technologies, this initiative seeks to create an independent BRICS financial infrastructure, further distancing the group from the dollar-centric global order. “The block chain-based system will enhance the security, efficiency, and transparency of cross-border transactions within the BRICS+ region,” explained Yi Gang, Governor of the People’s Bank of China.
These payment innovations come amid growing geopolitical tensions and the impact of Western sanctions on some of the BRICS members. By diversifying from the US dollar, the bloc hopes to insulate its economies from external financial pressures and expand mutual trade and investment. “The creation of the BRICS Bridge and block chain platform is a strategic move to strengthen our financial cooperation and resilience,” said South African Reserve Bank Governor Lesetja Kganyago[1][3].
The BRICS+ Landscape: An Evolving Geopolitical Landscape
The expansion of BRICS to include Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE has significantly altered the geopolitical landscape of the group. The addition to these new members, particularly major energy producers and importers, have broadened the economic and strategic influence of the association. “The inclusion of Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE has further strengthened the BRICS+ bloc, both in terms of economic and political heft,” noted Rajeev Sharma, a senior fellow at the Observer Research Foundation in New Delhi.
The BRICS+ group now represents a significant portion of the world’s population, economic output, and energy resources. This enhanced economic and geopolitical influence provides the foundation for the bloc’s ambitious plans to develop alternative financial and trading mechanisms, reducing reliance on the US dollar and Western-led institutions. The BRICS Bank, now known as the New Development Bank (NDB), has also played a critical role in mobilizing resources for infrastructure and sustainable development projects among member countries.
Implications and Future Developments
The BRICS payment initiatives are expected to have far-reaching implications for the global financial landscape. By enhancing financial integration among member states and promoting the use of national currencies, the BRICS+ bloc aims to become less vulnerable to external financial pressures and sanctions. The creation of the BRICS Bridge and the block chain-based payment system also has the potential to boost mutual trade turnover among member states, further strengthening economic ties within the association.
Dr. Stella Tarnopolskaya, a Professor of International Economics at the Higher School of Economics in Moscow, remarked, “The BRICS+ bloc’s payment innovations could have a significant impact on global trade and investment flows. If successful, these initiatives could challenge the dominance of the US dollar and the hegemony of Western financial institutions, ushering in a more multipolar international monetary system”.
As the BRICS Finance Ministers and Central Bank Governors’ continue to refine these payment mechanisms, discussions would be held at the upcoming BRICS Summit in Kazan in October 2024 with a focus on ensuring the robustness and efficiency of these systems while maintaining political neutrality. The Summit is expected to be pivotal in finalizing the details of the BRICS digital payment platform, which has been described by Russian officials as a “bombshell” in the global financial landscape.
Conclusion
As the BRICS+ bloc continues to evolve, the world will be closely watching the impact of these innovative payment solutions on the global financial order. The successful implementation of the BRICS Bridge and block chain-based system could mark a significant shift in the balance of power, challenging the dominance of the US dollar and Western-led monetary frameworks. “The BRICS payment initiatives represent a bold and ambitious attempt to diversify away from the US dollar and create a more inclusive, multipolar financial system,” concluded Rajeev Sharma. “The outcome of this endeavor will have far-reaching implications for the global economy and the geopolitical order in the years ahead.
Citations:
– BRICS and de-dollarization, how far can it go? – Responsible Statecraft https://responsiblestatecraft.org/dedollarization-china-russia/
– The creation of independent payment system will be discussed at BRICS https://realnoevremya.com/articles/7929-the-creation-of-independent-payment-system-will-be-discussed-at-brics
– Russia Reports Major Progress on BRICS Digital Payment System https://www.cryptoglobe.com/latest/2024/08/brics-digital-payment-system-could-be-a-global-bombshell-says-russia/
– Joint Statement of the BRICS Ministers of Foreign Affairs/International … https://mid.ru/en/foreign_policy/news/1955719/
– An Evolving BRICS and the Shifting World Order | BCG https://www.bcg.com/publications/2024/brics-enlargement-and-shifting-world-order
– What the Expanding BRICS Universe Means for the Global Economy https://internationalbanker.com/finance/what-the-expanding-brics-universe-means-for-the-global-economy/
– Prospects for BRICS New Currency and New Payment System https://moderndiplomacy.eu/2024/08/15/prospects-for-brics-new-currency-and-new-payment-system/