Do BRICS want their own currency, can it succeed?

The BRICS countries (Brazil, Russia, India, China, South Africa) have recently taken significant action - discussing the launch of a trap to bypass the US dollar for payments. This may seem simple, but it is actually a reshuffling of global economic power.

Why are the BRICS doing this?

Data speaks: The BRICS countries account for 40% of the world's population and 25% of global GDP. However, such a large block is choked by the dollar in international trade. They constantly face the risk of U.S. economic sanctions and exchange rate fluctuations—Russia was kicked out of the dollar settlement system due to the Ukraine conflict, which serves as a warning for everyone.

At the 2023 BRICS Johannesburg Summit, leaders from various countries clearly stated: We want to do business with our own currencies and no longer have to go through the US dollar for everything.

What are the possible solutions?

Plan A: Digital Currency Alliance

Countries issue their own digital currencies, interconnected through blockchain or proprietary channels. The advantage is that there is no need to create new currencies, and each country retains its autonomy; the disadvantage is that the technical integration is complex and the security risks are high.

Plan B: Basket Currency System

Similar to the IMF's Special Drawing Rights (SDR) — a “basket of currencies” composed of the currencies of five countries in proportion, used for direct settlement in international trade. Sounds good, but agreeing on the distribution of exchange rate weights among countries involves a game of interests.

Plan C: BRICS version of “Trade Settlement Center”

Establish an independent clearing institution, allowing merchants to trade in local currency with automatic backend conversion. This has the lowest difficulty but requires the establishment of trust mechanisms and risk prevention mechanisms.

Why is it difficult?

The differences in economic structure are significant

China's GDP is 17 trillion dollars, India's is 6 trillion, and Russia's is only 2 trillion. The price levels, inflation rates, and debt ratios of the five countries are all different; whose currency serves as the anchor? Once a country experiences an economic crisis, the entire system's risk will skyrocket.

Political trust cost is high

Russia and India, as well as India and China, have border disputes; Brazil and other countries have significant differences in trade structures. If we really want to delegate power to a common mechanism, all countries will have to make concessions — this has a high political cost in today's era of nationalism.

The network effect of the US dollar is still strong

97% of global foreign exchange transactions are conducted in US dollars; trade in Europe, Southeast Asia, and the Middle East is also priced in US dollars. Even if the new currency from BRICS is launched, how widely will it be accepted? The US will certainly strike back from three dimensions: finance, technology, and public opinion.

Current Situation and Prospects

Currently, various countries are still in the pilot stage—India and China have already partially settled in rupees and renminbi in border trade; the Brazilian central bank is researching digital currency interoperability. However, these are all “touchstones” and the official BRICS unified payment is still a long way off.

The Most Realistic Scenario: In the next 3-5 years, BRICS will launch a common “trading clearing framework” instead of a true unified currency. Countries will retain their local currencies but will settle directly through this framework, bypassing the dollar intermediary—this way, it can achieve the goal of de-dollarization without having to tackle the huge challenge of a unified currency.

The core logic is very clear: the dominance of the US dollar is the cornerstone of Western financial hegemony. By shaking this stone, BRICS is actually challenging the entire international financial order. Whether it will succeed is another matter, but this direction is certainly a historical trend.