The BRICS group of emerging economies – which includes Brazil, Russia, India, China, and South Africa – has drafted plans for a new cryptocurrency settlement solution to be used between the partner nations.
The cryptocurrency, which hasn’t been formally named or detailed yet, will be used as part of a single payment network between the countries and their partner companies.
The BRICS business council gave its support for the Russian Direct Investment Fund (RDIF) to lead plans to build the single payments system.
Russian news outlet RBC reported on November 14 that RDIF director Kirill Dmitriev said the move was to ensure that the stability of settlements and investments between BRICS countries is maintained.
Dmitriev also noted that payments between BRICS nations make up over 20% of global foreign direct investments, and more robust infrastructure to facilitate these transfers was required, citing increasing non-market risks to current global payment infrastructure.
A BRICS cryptocurrency
Rather than creating a single stablecoin or token to transact with, it’s predicted that the BRICS nations will be using cryptocurrency for its immutable and traceable nature.
Discussing how the cryptocurrency would work, a member of the BRICS expert council explained:
“It will be like certain obligations that can be transferred from one legal entity to another to confirm that the recipient will have claim rights, and the contractor will have obligations for a specific amount. It will not be money, we can say that it will be a paperless document flow to facilitate transactions.”
The cryptocurrency has been proposed amid a backdrop of decreasing dollar reliance for BRICS nations, who according to Dmitriev have reduced the use of US dollars in their foreign trade settlements from 92% to 50% over the last five years.
An alternative to SWIFT
The launch of a single settlement cryptocurrency would be one of the first concerted efforts by the BRICS nations to form an alternative to the US dollar-dominated SWIFT international payment system.
SWIFT is currently the most widely used payment processor for international bank transfers, though critics have pointed out that it’s too heavily influenced by US policy.
As reported by the Financial Times, SWIFT has historically complied with US sanctions, suspending Iranian banks from its network last year.
It’s unclear how the newly proposed BRICS cryptocurrency would be used between countries who are subject to US sanctions. However, as it would be independent of US intervention, it could be used to facilitate trade with sanctioned nations.
Computing giant IBM has also announced plans to leverage blockchain technology for international remittance, which may further decrease reliance on the US-dominated system.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.