The recent launch of the BRICS Payment System has sent shockwaves through the international financial landscape. This alternative to the ubiquitous SWIFT network, unveiled in July 2024, has garnered significant interest, with a reported 159 countries expressing willingness to adopt it. This development raises intriguing questions about the future of global trade and potential de-dollarization efforts.
A Counterweight To SWIFT?
For decades, the US-dominated SWIFT system has served as the backbone for cross-border financial transactions. However, concerns have mounted over its susceptibility to political influence. Several countries have faced exclusion or limitations on their access to SWIFT due to strained relations with the US. The BRICS nations – Brazil, Russia, India, China, and South Africa – view their new payment system as a way to circumvent this perceived weaponization of SWIFT.
Reshaping Trade and Currency Landscape
The BRICS system aims to facilitate cross-border transactions and settlements without relying on the US Dollar. This could potentially alter global trade dynamics by reducing dependence on the dollar as the primary reserve currency. Discussions about a gold-backed BRICS currency are also swirling, further challenging the dollar’s dominance. Additionally, member states are exploring the use of local currencies for settlements, potentially leveraging blockchain technology for secure and transparent transactions.
Blockchain and Crypto – A Bridge Too Far?
While the BRICS system presents a compelling alternative, replacing the established order won’t be a walk in the park. The sheer number of local currencies within the bloc poses a logistical challenge for international trade. Moreover, integrating with Western economies accustomed to the dollar-based system will require significant adaptation.
However, cryptocurrencies could emerge as a potential bridge. Russia’s recent legalization of crypto for cross-border payments hints at this possibility. Kremlin aide Yury Ushakov acknowledges the potential of crypto as a “strong bridge” across the bloc and beyond political boundaries. Even the US has shown interest, with former President Donald Trump once advocating for Bitcoin’s adoption as a reserve currency.
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One major question mark remains – China’s stance on crypto. While other BRICS members embrace digital assets, China has maintained a more cautious approach, implementing strict regulations on crypto trading and mining. Whether China will join the crypto wave for cross-border settlements within the BRICS system is yet to be seen.
The launch of the BRICS payment system marks a significant development in global finance. Its success will depend on its ability to overcome logistical hurdles and secure broad international acceptance. Whether it becomes a true rival to SWIFT or a niche player remains to be determined. However, one thing is certain: the BRICS system has ignited a conversation about de-dollarization and a potentially more multipolar financial future.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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