The use of the US dollar as the global reserve currency is increasingly being challenged by the BRICS countries. BRICS is an acronym of Brazil, Russia, India, China and South Africa, a group of pioneering emerging economies aiming to set up its own currency. The idea of a new medium for payments is gaining momentum, as highlighted by Russian State Duma Deputy Chairwoman Alexander Babakov during the St. Petersburg International Economic Forum event in New Delhi. According to him, the new currency could potentially be a digital one, secured by gold and other commodities such as rare-earth elements, and should be outside the influence of the West.

Jim O'Neill, former Goldman Sachs chief economist, also recently published the paper 'Challenging the US Dollar's Dominance in Global Finance' and called for expansion of the BRICS alliance to disrupt the hegemony of the US dollar. He noted that the role of the US currency is "far too dominant".

The idea of a BRICS currency is not a new concept, as Cointelegraph reported in 2019 that BRICS members were discussing the potential creation and use of a new digital currency for a unified payments system. Now, it seems, the likelihood of receiving the go-ahead and it becoming a reality increases significantly.

Furthermore, recent news signals the bloc's determination to use their own currencies, as China and Brazil struck a deal to trade directly in their own money, bypassing the US dollar as intermediary. In a similar move, China has been rapidly advancing with its Central Bank Digital Currency project, and Brazil has legalized crypto as a payment method in the country.

Nevertheless, a BRICS currency is still in its early stages and the current framework is still largely centralized. This means that benefits such as faster settlements may be improved significantly, but it requires the use of a stablecoin, whose development poses certain risks such as bank runs and volatility when pegging. The possibility of certain risks must be acknowledged and factored in the development of the BRICS currency. However, the clear intent and commitment of the BRICS alliance is a big step toward legitimizing the concept of a unified global payments system and global currency.



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