BRICS Bloc Plans to Create Blockchain-based Payment System to Reduce Dependence on US Dollar
The BRICS bloc, consisting of China, Russia, Brazil, India, and South Africa, aims to develop a payment system based on blockchain and digital technologies to decrease reliance on the US dollar.
The BRICS bloc, comprising China, Russia, Brazil, India, and South Africa, has announced plans to create a payment system based on blockchain and digital technologies. The move is aimed at reducing dependence on the US dollar and increasing the role of BRICS in the international monetary and financial system. The bloc’s goal is to develop an independent payment system that is convenient, cost-effective, and free from political influence. This article explores the implications of this initiative and its potential impact on the global financial landscape.
Blockchain Technology and its Role in Payments:
A blockchain is a decentralized network that simplifies payments by authenticating transactions in real-time using data stored in a secure and transparent manner. Bitcoin and Ethereum are examples of popular blockchain platforms. By leveraging blockchain technology, the BRICS bloc aims to streamline payment processes and reduce reliance on traditional banking systems, which are often subject to political influence.
BRICS’ Ambitions for an Independent Payment System:
The BRICS bloc has long sought to decrease its dependence on the US dollar and strengthen its position in the global financial system. In the 2023 Johannesburg Declaration, BRICS leaders agreed to increase settlements in national currencies and strengthen correspondent banking networks. The creation of a blockchain-based payment system aligns with these objectives, as it would allow for seamless cross-border transactions while reducing exposure to the US dollar.
The Contingent Reserve Arrangement (CRA) and Competition with the IMF:
The BRICS bloc also aims to develop the Contingent Reserve Arrangement (CRA), an agreement among the central banks of BRICS countries to provide mutual support during currency crises. The CRA is seen as a competitor to the International Monetary Fund (IMF) and seeks to provide an alternative to the dominant role of the US dollar in international transactions. By utilizing currencies other than the US dollar, the BRICS bloc hopes to enhance financial stability and reduce vulnerability to economic sanctions.
Challenging the Dollar’s Dominance:
The BRICS bloc’s efforts to create an independent payment system and strengthen the CRA reflect a broader trend of challenging the US dollar’s global dominance. The bloc argues that the days of a dollar-centric world are over and that a multipolar global trading system is emerging. Economic sanctions imposed by the US have prompted countries to seek alternatives to the US dollar to mitigate currency risks and bypass restrictions. More than 40 countries, including Iran, Saudi Arabia, Egypt, and Indonesia, have expressed interest in joining the BRICS bloc to reduce their dependence on the US dollar.
Conclusion:
The BRICS bloc’s plan to create a blockchain-based payment system marks a significant step towards reducing dependence on the US dollar and strengthening its position in the global financial system. By leveraging blockchain technology and promoting settlements in national currencies, the bloc aims to enhance financial stability and reduce vulnerability to economic sanctions. As more countries express interest in joining the bloc, the influence of the US dollar may face challenges, ushering in a new era of multipolar global trading.