The idea of BRICS launching a new currency to take on the U.S. dollar turned futile this year. BRICS acknowledged that creating a new currency in the international markets is complex and needs more dynamic framework. Therefore, the formation of a new currency to challenge the U.S. dollar is currently stalled. Nonetheless, Russia’s President Vladimir Putin said this month that it is necessary for BRICS to settle trade transactions in local currencies and not the U.S. dollar.
He added that BRICS will look into the formation of a new system, which includes financial logistics that would enable countries to settle global trade in local currencies, bypassing the U.S. dollar. Russia and China are advancing to keep local currencies at the forefront and not the USD. Read here to know how many sectors in the US could be affected if BRICS completely stops using the dollar.
“Within the BRICS framework, it is necessary to create not a single currency but a system of financial logistics and mutual settlements in national currencies,” said Putin.
BRICS Local Currencies Vs. the US Dollar
The framework is only an idea and the new financial system is yet to be formed and put to work. The BRICS alliance has thrown several ideas in the last six months to dethrone the US dollar. None of the ideas have turned into reality except for expanding to an 11-member alliance.
However, China and Russia are building a new payment mechanism that could help other countries end dependency on the dollar. The payment mechanism could benefit BRICS members mutually by putting the local currencies ahead of the USD.
The alliance is doing everything possible to liberate itself from the dollar and strengthen its local currencies. The native economies of BRICS countries could boom and businesses could thrive parallelly if their respective currencies get stronger against the USD.