Brazil, Russia, India, China and South Africa make up the BRICS organization, which is currently developing the BRICS currency as an alternative to the US dollar as the world’s reserve currency.
The world’s reserve currency is crucial in international transactions and trades because it reduces exchange rate risks. If the BRICS currency ends up becoming a reality, it could have major effects on the US. “International investments could greatly be affected if the BRICS currency ends up replacing the US dollar as the world’s reserve currency. US investments would decrease while investments in BRICS countries would increase,” stated senior Himanshu Jangid.
These countries are considering creating a new currency in order to decrease dependence on the US dollar and foster financial inclusivity. Additionally, a more unified currency will make it easier to complete cross-border transactions without fees.
“It is true that the US dollar is a very powerful currency, but I think that other countries should also get some more say in global trade,” said senior Nikhil Namshamgari. The goal of these BRICS countries is to reduce the involvement of the US in international trade.
The BRICS currency is said to be a gold-backed currency instead of a fiat currency like the US dollar and most other currencies. Fiat currency is money that is not backed by anything and is regulated by the government.
The creation of the BRICS currency could greatly affect the US dollar, including decreased demand for US investments and dollar-denominated assets. “Having a unified currency would make trade easier and allow for better international relations between countries,” stated Namshamgari.
The BRICS currency would have a lot of global power if it was created, as the currency’s founding countries would have a combined population of 3.5 billion people and control around 28% of the global economy. This would automatically make it the most widely used currency.
This year, five new countries have joined the BRICS group: Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. All these countries will further increase the group’s power as many of these are Middle Eastern countries that supply the majority of the world’s oil.
The BRICS currency is still a concept, and it may be a long time before new developments or real-world implementations are attempted. However, if it were to become a reality, the currency’s effect would be immense.
