BRICS eye stifling US dollar influence with blockchain-based payment system

Global intergovernmental organization BRICS is bracing for the launch of a cross-border payment system based on the concept of digital currencies and blockchain technology.

The group seeks alternatives to the United States dollar as the de facto currency in international trade. BRICS, comprising Brazil, Russia, India, China, and South Africa, is weighing several options to reduce the dependency on the greenback for settlement.

Among the options at its disposal, it appears that the economic coalition will pursue a blockchain-based payment system using digital currencies as the main settlement currency.

“We believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain,” said official Yury Ushakov.

Although the report did not delve into the internal workings of the payment system, there is wide speculation that the system will rely on central bank digital currencies (CBDCs) to facilitate trade.

Several BRICS member states are actively pursuing retail and wholesale CBDCs, with China leading the pack with the advanced testing of the digital yuan. India’s experiments have seen it onboard leading commercial banks and sign high-profile bilateral agreements, while Brazil’s CBDC pilot has recorded its share of successes.

There are also rumors that the BRICS system may turn to stablecoins for settlement as part of its de-dollarization drive. Russia has previously tinkered with stablecoins for cross-border transactions and may pursue their usage during its tenure as BRICS chair.

“The main thing is to make sure it is convenient for governments, common people, and businesses, as well as cost-effective and free of politics,” said Ushakov.

Alongside the blockchain-based payment system is the ambitious Contingent Reserve Arrangement (CRA) designed by member states to use local currencies as an alternative to the U.S. dollar to “protect against global liquidity pressures.”

Sanctions may be fueling the new drive

Since Russia began its invasion of Ukraine in 2022, Western powers have slammed economic sanctions on the superpower, shrinking the economy by nearly 5%.

To circumnavigate the sanctions, Russian authorities set their sights on digital currencies as a viable alternative, but the exit of centralized exchanges from the country muddied the waters for the country.

In early March, Russia’s Finance Minister Anton Siluanov disclosed plans for a BRICS Bridge system for international settlements designed to even the odds against Western economic powers.

“This transformation is not straightforward. We see what restrictions and sanctions are trying to restrain China and Russia—these are the consequences of the paradigm shift,” said Siluanov.

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