A solution in search of a problem

While the idea of a BRICS currency is a powerful negotiating tool in challenging dollar dominance, there are more long-term solutions

- K YATISH RAJAWAT

THE DREAM OF a BRICS currency—a unified tender for Brazil, Russia, India, China, and South Africa—has lingered as a geopolitical counterweight to the dollar's dominance. Advocates see it as a path to financial sovereignty, freeing emerging markets from the constraints of dollar hegemony. But in today's fast-evolving financial ecosystem, where Central Bank Digital Currencies (CBDCs) are becoming mainstream, pursuing a BRICS currency seems anachronistic, and even redundant.

CBDCs, issued by central banks and powered by blockchain or other distributed ledger technologies, allow countries to settle bilateral trade directly, as opposed to the traditional "interim" currencies like the dollar. This makes a BRICS currency unnecessary for the very purpose it seeks to serve. With CBDCs, India can settle its energy trade with Russia in digital rupees and rubles. Similarly, Brazil and South Africa can transact directly without needing to peg their payments to a standard tender.

CBDCs' efficiency lies in their digital-first nature. Traditional cross-border payments rely on a multi-layered system involving correspondent banks, Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging networks, and currency conversion, each adding time delays, compliance costs, and transaction fees.