BRICS Summit 2023

The five largest emerging markets of the world that includes some Brazil, Russia, India, China and South Africa will meet in Cape Town South Africa from June 2 to 3 to discuss the possibility to include 25 new members. 13 countries have formally asked for the membership and there are other informal submissions. The upcoming summit will discuss the modalities of how the membership will be given to these new applicants. Saudi Arabia, Iran, the United Arab Emirates, Argentina, Algeria, Egypt and Bahrain are among those who formally applied for the membership.

BRICS currency and de-dollarization

This summit is important in the context of de-dollarization. The BRICS nations are looking to create a new currency to compete with the US dollar. The new reserve currency will be backed by their respective native currencies and by gold. Nothing has been known about the structure of this new currency. The concept of new currency came to the surface because of this ongoing situation in Ukraine and the ongoing trade war with China. Countries are increasingly looking to not use dollar and use their own native currency for trading. Especially emerging countries are more inclined to use their own currency to make sure they're not relying on the United States dollar.

If the concept of having a BRICS currency comes to fruition that could mean a direct implication for the US dollar and the US economy. Will this concept succeed is another question to answer when we already know how the euro dollar system evolved in the last 30 years.

Why is it needed?

So why do BRICS nations need this new currency? The answer is very simple. Recent macro political scenario gives us an example of how The United States can use its economic and monetary power to win war. These countries are looking to reduce their dependency on the US dollar and the euro which is largely controlled by the west alliance.

Since the war with Ukraine started back in 2022, Saudi Arabia Brazil, India and China have purchased fuel and other commodities using their own native currencies. experts suggested that this could be the start of the D- dollarization process.

What are the benefits of this new currency?

The new currency will reduce the reliance on euro dollar system for international trade. The member countries will be able to use new currency whenever they want. There is a possibility that the new currency will use blockchain technology, digital currencies and smart contracts to facilitate an update the global financial system that has been running around the century old U.S. dollar system.

This could also mean that there is an increased participation in cross-border transactions between these member states. Hence, this will reduce the influence of the United States and the USD. The new currency will encourage other countries to develop regional currencies creating multipolar economic system.

Will it dethrone Dollar?

No, I don't think so. It is childish to think that a new trading currency without any history will dethrone a century old monetary system developed around the US dollar. Much is needed to happen before dethrone the USD. The new currency may have the backing of the gold reserve, may also have enough political clout but it will not have the confidence of of the countries outside of their structure.

We don't need to go far and can look at the EUR system. Everyone thought that this new currency backed by the European economy will dethrone the US dollar supremacy. That never happened. The whole concept of this new currency is based on flawed principle and greed. There is vested interest between member states and that is to remove the dollar supremacy. Once that happens, the member states will then fight with each other for supremacy. Each member state has their own currency and not sure how the native currencies will merge once they have the BRICS currency.

To be honest, we may need to see how the new currency will be adopted by member states and other countries and also figure out how stable they are and providing alternative solution to the dollar system.

Let’s wait for things to settle down.

I'll be keeping a keen eye to the upcoming meeting that will happen in a couple of weeks in Cape Town, South Africa.

What do you good people of hive think?