The BRICS alliance will jointly decide on the formation of a new currency in the next summit in August in South Africa. The move could hamper the prospects of the U.S. dollar and challenge its status as the global reserve currency. If more countries begin to accept the soon-to-be-released currency for cross-border transactions, it could send the USD on the path of decline. Therefore, the summit in August is decisive and could reshape the geopolitical landscape and traditional financial establishments.
BRICS is an acronym for Brazil, Russia, India, China, and South Africa. The alliance could soon expand to BRICS+ as many countries could be allowed to join the bloc of nations.
Also Read: BRICS Bank That Was Built To Challenge U.S. Dollar Now Needs USD
What Happens to the U.S. Dollar if BRICS Launch New Currency?
The new BRICS currency could gradually shift the global reserve currency status away from the U.S. dollar. A handful of sectors in the U.S. could be impacted by the move causing widespread job cuts if the currency grows stronger. Read here to know which sectors in the U.S. are at risk due to the formation of BRICS currency.
Also Read: BRICS: Iraq Bans U.S. Dollar, Egypt Ditches USD, France & Pakistan Pay With Chinese Yuan
The U.S. dollar could face a decrease in demand leading to the greenback beginning to depreciate. If the U.S. dollar loses its supply and demand mechanics in the markets, the BRICS currency will gain the upper hand. If more countries sideline the USD, America will have no options to fund its deficit.
The U.S. economy is at risk of a decline giving way to developing economies to gain control of the world’s finances. Nonetheless, there is no certainty that the BRICS currency will lead to the collapse of the U.S. dollar.
Also Read: BRICS: 30 Countries Participate to Ditch the U.S. Dollar as Global Reserve Currency
In conclusion, the greenback is currently the world’s primary reserve currency and plays a significant role in global financial systems. The USD is the de facto currency for international trade and no other tender comes close to its potential power.