The BRICS group comprises Brazil, Russia, India, China, and South Africa, which is developing a shared currency to replace the US dollar and challenge American dominance. The action is being taken as Beijing and Moscow demand de-dollarization in response to Western sanctions.The US dollar has been the standard for international trade for many years. However, BRICS new currency has been recently discussed to replace the dollar and challenge American hegemony.

De-dollarization has gained momentum recently, notably since the start of the Russia-Ukraine war in February. The deputy chairman of the State Duma, Alexander Babakov, stated last week that the BRICS countries are developing a new payment system based on a plan that “does not defend the dollar or euro.” This gave more momentum to the campaign.

Do the BRICS countries genuinely produce a new trade currency? Who is leading this movement today? Will India profit from it? Will the plan come to pass? This situation raises numerous questions.

Replacing the ‘King of Money’ 

The US dollar is often called the “king of currencies.” In 1944, it was recognized as the world’s official reserve currency. The Bretton Woods Agreement, a delegation of 44 allies, decided the matter.Since then, the dollar has had a significant position in the global economy. It has given the US an excessive amount of sway over other economies. The US has historically used sanctions to further its foreign policy.

Others, like Russia and China, want to end the dollar’s hegemony because they don’t appreciate following US regulations. “De-dollarization” refers to diminishing the dollar’s dominance on international markets. It involves switching from using the US dollar to another currency to transact in oil and other commodities.

De-dollarization proponents contend that by lessening other nation’s reliance on the US dollar and its economy, they will be able to reduce the effects of US political and economic changes on their economies. Additionally, nations can lessen their susceptibility to interest rates and currency volatility, enhancing economic stability and lowering the likelihood of financial crises.Over the past few years, and particularly in the prior year, this movement has accelerated. The International Monetary Fund stated in 2022 that central banks today maintain fewer dollars in reserves than they did in the past.

Using data from the IMF’s Currency Composition of Official Foreign Exchange Reserves, the article reported that “the dollar’s share of global foreign exchange reserves fell below 59 percent in the final quarter of last year, extending a two-decade decline.” “Strikingly, the decrease in the dollar’s share has not been accompanied by a rise in the claims of the pound sterling, yen, or euro, other long-established reserve currencies, instead, the move away from dollars has been in two directions: one-quarter into the Chinese yuan and three-quarters into the money of smaller nations that have played a more restricted role as reserve currencies.

Approximately half of Russia’s foreign exchange assets, or $300 billion, were frozen by Western governments last year as retaliation for its invasion of Ukraine. Additionally, Russian banks were banned from the Swift system of global payments.”The so-called dollar “weaponization” has roiled many countries, not just Russia,” says Jason Hollands, managing director of investment platform Bestinvest.

“Countries willing to carry on business with Russia, like India and China, have begun doing so in rupees and yuan instead, sparking talk of the de-dollarization of the global trading system.”

He also noted that because of their recent yuan trade, Brazil and China had furthered the development of the Chinese renminbi as a viable alternative to the US dollar.

India has been attempting to stray from the dollar as well. Eighteen nations recently received authorization to transact in Indian rupees, including the United Kingdom, Germany, Russia, and even the United Arab Emirates. Renowned economist NourielRoubini had predicted in February that the Indian rupee might eventually rank among the world’s reserve currencies.

The economist known as Doctor Doom remarked in an interview with ET Now, “One can see how the rupiah could become a vehicle currency for some of the trade that India does with the rest of the world, especially South-South trade.”

“The Indian rupee may be a unit of account, a method of exchange, and a store of wealth. Indeed, the rupiah has the potential to develop into one of the many global reserve currencies.

New Currency = Stronger Partnership

To improve commerce, the BRICS nations are also considering the creation of a new currency. According to reports, the nation’s annual conference in South Africa in August might mark the beginning of the recent financial deal. According to the news Russia is the driving force behind the plan because it has been subject to economic sanctions by the West due to its invasion of Ukraine.

The “most viable” course to follow at this moment, according to Alexander Babakov, is to create a shared currency that can be used for payments. He emphasized that both Russia and India would gain from this. Moscow and New Delhi should establish a new economic partnership with a new common currency, the Indian rupee or a digital ruble.

He continued that establishing a unified currency would also be significantly aided by China, bringing an extra 1.4 billion people into the system. The majority of governments today support a multipolar world presently instituted by three countries: New Delhi, Beijing, and Moscow, he claimed. “Its composition should be based on introducing new monetary ties established on a strategy that does not defend the US dollar or euro, but rather forms a new currency capable of benefiting our shared objectives.”

It’s interesting to note that Brazil has already started to accept the yuan as a currency for trade settlements and investments. Under the Rupee-Rouba arrangement for trade between India and Russia, dues are settled in rupees rather than dollars or euros.This demonstrates that the goal of the BRICS countries is to alter the dollar’s hegemony, which will finally result in the de-dollarization of the entire world.

Effects of the BRICS New Currency

The BRICS country’s economies might be stabilized if they move forward with their plan and create a new currency. It would translate into more consumer confidence for investment in the BRICS nations. Spending would increase, and the economy would expand as a result.

Will India, however, accept this new money? Will it desire to connect itself economically with China, with whom it is currently engaged in a confrontation at the border? It’s still being determined what will happen next. But it is undeniable that the dollar is weakening.