The BRICS Currency: Tangible Change or Mere Ambition?
The United States dollar is uniquely positioned as the world’s most dominant currency. It serves as the global reserve currency, meaning it is held in large quantities by central banks and financial institutions and is used for most international transactions. Its rise to this position was driven by the strength of the U.S. economy, the depth of its financial markets, and the fact that oil and other key commodities are priced and traded in dollars.
With over $29 trillion in marketable securities outstanding, the U.S. Treasury market is the deepest and most liquid in the world. This gives investors confidence that they can always buy or sell Treasuries without disrupting prices, something BRICS markets cannot match at this stage. The dollar’s global role also allows U.S. companies and banks to operate with reduced currency risk, reinforcing its central place in the world economy.
At the same time, there are growing discussions about possible alternatives. Some countries have started settling trade in non-dollar currencies, reflecting an effort to diversify away from the U.S. financial system. While the dollar is still the most trusted and liquid currency worldwide, the BRICS bloc has proposed the idea of a joint currency to reduce dependence on it. Leaders like Brazilian President Luiz Inácio Lula da Silva have publicly supported this, framing it as part of reshaping the financial order. This raises the question: after decades of dollar leadership, could a BRICS currency emerge as a competitor, or will it remain more symbolic than real?
Why BRICS Wants a Currency
The main motivation for BRICS is to reduce dependence on the dollar. Relying on it exposes members to sanctions and financial volatility. For example, when the Federal Reserve raises interest rates, borrowing costs in dollars rise globally, putting pressure on emerging markets. A shared BRICS currency is seen as a way to lessen these vulnerabilities while boosting trade within their own economies.
The dollar is on one side of about 88% of all foreign exchange trades and makes up around 58% of global central bank reserves. By comparison, the euro accounts for roughly 20% and the Chinese renminbi only about 3%. From the BRICS point of view, this level of concentration is risky. As Lula stated, “The world needs to find a way so that our trade relationship does not need to go through the dollar. Nobody has determined that the dollar is the currency standard.”
At the Kazan summit, BRICS leaders emphasized the dangers of unilateral sanctions and described the U.S.-led financial system as disruptive. They called for a more independent framework that would make members less vulnerable to external shocks.
Symbol of a Multipolar World Order
The BRICS summit in Kazan was one of the largest foreign policy events of 2024. Alongside the nine full members (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the UAE), twenty other invited states attended. This showed how BRICS is becoming a hub for Global South coordination. The summit declaration underlined the rise of new centers of power and called for a fairer and more democratic financial system. By presenting themselves as leaders of the Global South, BRICS countries are using the currency idea as a symbolic challenge to Western institutions like the IMF and World Bank.
Their rising share of global trade gives this project some credibility. The inclusion of major energy exporters such as Russia, Iran, and the UAE strengthens BRICS’ influence in commodity markets, which is critical for trade settlement. Even if a common currency remains mostly symbolic for now, it signals a clear intent to create financial alternatives outside the Western system.
Core Challenges
The biggest obstacle is the economic gap between members. China runs a huge trade surplus and holds vast reserves, while countries like South Africa and Brazil face debt pressures and high inflation. A common currency would inevitably tilt toward Chinese dominance, creating fears of a “yuan zone” that India, Brazil, or South Africa would resist.
Unlike the euro, BRICS has not built institutions capable of supporting a currency. The New Development Bank (NDB), with $100 billion in authorized capital, and the Contingent Reserve Arrangement (CRA), another $100 billion, provide some financing tools. But together they are still far smaller than the IMF, which has about $1 trillion in lending power. Without stronger institutions, a BRICS currency lacks the stability needed to become a reserve asset.
The yuan, though the most advanced BRICS currency, still faces strict capital controls. Other members’ currencies, like the Brazilian real or South African rand, are volatile and prone to inflation. These differences make it hard to build trust in a shared system. Inflation and currency swings across members show that BRICS lacks a common macroeconomic base.
Europe’s single currency worked because it followed decades of integration. The Treaty of Rome (1957) created the European Economic Community, and the Maastricht Treaty (1992) set out the roadmap to the euro, backed by strong institutions like the European Central Bank. BRICS lacks this history of integration, as well as the political trust that held the EU together. The ongoing India-China rivalry illustrates why BRICS cannot easily reach the same level of cooperation.
Global Implications
The U.S. dollar is unlikely to lose dominance in the near future. It accounts for about 58% of global reserves and appears in nearly 90% of foreign exchange trades. More importantly, U.S. Treasuries, with over $29 trillion outstanding, function as the world’s safe asset. Central banks and investors know they can trade Treasuries in huge volumes without moving prices. BRICS cannot replicate this liquidity and trust until they create a bond market of similar depth, which would require decades of institutional development. At best, BRICS could erode the dollar’s role in trade settlements, particularly in energy markets, but it cannot displace the dollar as a global store of value.
A BRICS currency could provide limited opportunities for diversification for emerging markets. Countries might experiment by settling some trade in BRICS currencies or gradually holding a small percentage of reserves outside the dollar, but only if inflation and convertibility risks are controlled. This would likely happen in increments, similar to the way central banks raised gold holdings after the global financial crisis, rather than through any dramatic overnight shift.
Finally, the symbolic side matters. BRICS’ push to reform the IMF and World Bank reflects frustration with an order where they represent nearly a quarter of global GDP but hold only about 10% of IMF quotas. Institutions like the New Development Bank and the Contingent Reserve Arrangement provide alternatives, but together they total under $200 billion, compared to the IMF’s trillion-dollar capacity. This gap underscores that the BRICS’ project is more a challenge to Western financial governance than an immediate alternative to the dollar.
Conclusion
The BRICS currency is best understood as a financial experiment and a symbolic project rather than a true rival to the dollar. Its lack of deep institutions and safe assets prevents it from becoming a global reserve currency in the near term. Still, the initiative reflects growing frustration with dollar dependence and could push forward alternative systems such as regional payment networks, local-currency trade, and stronger institutions like the NDB. Even if it falls short of replacing the dollar, these steps may gradually reshape parts of international finance over time.
The United States dollar is uniquely positioned as the world’s most dominant currency. It serves as the global reserve currency, meaning it is held in significant quantities by central banks and financial institutions and is used as the medium for the majority of international transactions. Its rise to this status was driven by the strength and stability of the U.S. economy, the depth of its financial markets, and the fact that global oil and other commodities are predominantly traded in dollars.
With over $25 trillion outstanding, the U.S. Treasury market remains the deepest and most liquid in the world. This depth gives investors confidence that they can always buy or sellTreasuries without distorting prices, something BRICS markets cannot currently replicate. Furthermore, the dollar’s global role ensures that U.S. companies and financial institutions can conduct business with reduced currency risk, reinforcing the centrality of the dollar in the
world economy.
At the same time, discussions have emerged about the possibility of alternatives. Some countries have begun settling trade in non-dollar currencies, reflecting broader efforts to diversify away from reliance on the U.S. financial system. While the dollar continues to be the most liquid and trusted currency globally, questions have arisen about whether its dominance could eventually be challenged. Recently, attention has turned to the BRICS bloc and its proposal for a joint currency designed to reduce dependence on the U.S. dollar. Leaders, including Brazilian President Luiz Inácio Lula da Silva, have expressed support for such an initiative, framing it as a potential step toward reshaping the global financial order.
This development leads to an important question: after decades of effective leadership by the U.S. dollar, could a BRICS currency realistically emerge as a competitor, or will it remain largely aspirational?
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source image: https://www.rferl.org/a/brics-common-currency-challenge-russia-brazil/32571316.html
