Most currencies continue to walk in the shadow of the dollar. Policy-makers and diplomats from around the world are questioning the colossal influence of the apex currency at this stage. In fact, several measures are being taken to reduce its dominance, as nations look to steer away from the dollar.
Recently, Alexander Babakov, the Deputy Chairman of Russia’s State Duma, revealed that the BRICS countries—Brazil, Russia, India, China, and South Africa—are working on the development of a new form of currency. A former White House adviser recently noted that BRICS’ alternative to the dollar could enjoy high prospects for success. In retrospect, de-dollarization could become a reality.
Writing for Foreign Policy, Joseph Sullivan highlighted that a BRICS currency would pose a threat, unlike any other currency to the dollar’s dominance. He noted,
“Unlike competitors proposed in the past, like a digital yuan, this hypothetical currency actually has the potential to usurp, or at least shake, the dollar’s place on the throne.“
Also Read: BRICS Are Developing a New Currency: State Duma Deputy Chair
Is dollar’s reign to end soon?
Naming the hypothetical currency “bric,” Sullivan pointed out that it is realistic to imagine the BRICS using only bric for trade. Widening the horizon further, he explained that BRICS would not need to trade only with each other. Each member of the BRICS is an “economic heavyweight” in its own region. As a result, countries from around the world would likely be willing to do business in bric, according to Sullivan.
“As officials in BRICS countries grow increasingly emphatic about their desire to de-dollarize… the risk-reward tradeoff of de-dollarization will look increasingly attractive.“
Going forward, if the bric replaces the dollar as the reserve currency of the BRICS, Sullivan said that the reactions will be “varied and bizarre.” According to him, “applause” seems poised to come loudly from officials in BRICS countries. On the other hand, “boos” will likely stem from both former U.S. President Donald Trump and the U.S. national security community. However, highlighting the fact that drastic change will possibly unfold gradually, he concluded,
“Either way, the dollar’s reign isn’t likely to end overnight—but a bric would begin the slow erosion of its dominance.”
Also Read: BRICS Nations Shifting Global Economics and Political Order