The leaders of BRICS countries have decided to reboot the project on their digital currencies. Authorities in these countries believe that launching their own payment means will deal a blow to the hegemony of the US dollar. The idea of de-dollarization has resurfaced again!
If the central banks of BRICS countries join their efforts to forge ahead with their digital currencies, this will take a toll on the greenback’s reign. In 2023, President of Brazil Luiz Inácio Lula da Silva suggested creating a common currency for the union. This proposal was an important step toward de-dollarization. Despite the long and rocky path to this goal, the bloc of economic allies, namely, Brazil, Russia, India, China, South Africa, and new members such as Iran, Egypt, Ethiopia, and the UAE has set out to expand trade and lending in local currencies.
BRICS has to find ways of diminishing the dollar’s use on the back of tough anti-Russian sanctions as well as the hard stance on China’s exports expressed by the US and its allies.
Besides, Washington has imposed secondary sanctions on banks processing payments to and from Russia, even if they are conducted in currencies like the yuan. Therefore, digital currencies of the BRICS central banks could become an alternative means of payment.
Currently, the Bank for International Settlements is developing a platform for commercial account settlements and currency transactions in the digital currencies of the BRICS central banks. These payment means are similar to cryptocurrencies but are issued and supported by local regulators. The digital currency system underwent trials in 2022, but its full launch is still far off.
One successful example of such a payment means is the digital yuan, launched by the People's Bank of China. However, it is only used domestically, including for paying salaries in the public sector.