BRICS Currencies Challenge Dollar Dominance
2024-10-26
Bittime - BRICS is an acronym for Brazil, Russia, India, China and South Africa.
These five countries are the initiators of BRICS, and over time the number of members continues to increase.
BRICS is a forum for the world's leading developing countries to develop a geopolitical agenda that can compete with Western countries.
The competition in question is not just diplomatic negotiations, but also extends to the economic sector.
The latest news states that BRICS has initiated steps to release BRICS currency through Putin's action of showing off a sample of BRICS currency.
What is BRICS Currency?
BRICS currency is a common currency concept proposed by the BRICS countries (Brazil, Russia, India, China and South Africa) to increase trade and investment among members without relying on the US dollar.
The BRICS currency initiative is seen as a response to the dollar's dominance in global trade and economic sanctions against certain countries, which could disrupt their economic stability.
By creating a common currency, BRICS hopes to reduce dependence on the dollar and strengthen economic sovereignty among members.
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BRICS Currency Implementation Plan
BRICS Currency is planned to be used primarily in trade between member countries, such as trading oil, gas, or other raw materials, so that transaction costs associated with converting to dollars can be minimized.
However, the implementation of the BRICS currency will still face many challenges, such as the need to align monetary policies among member countries.
If successfully launched, BRICS currencies have the potential to change the global economic landscape, offer a more diversified alternative in the international financial system, and strengthen the influence of BRICS economies in the world.
The Dominance of the US Dollar is Threatened
For decades, currency US dollar has reached the peak of its dominance as a global currency.
Based on information released by the US Federal Reserve, between 1999 and 2019, the US dollar currency was used in 96 percent of international trade billing in America, and 79 percent worldwide.
Meanwhile, based on data compiled by the Atlantic Council, the US dollar currency has been used by almost 88 percent in currency exchange.
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Considering the status of the US dollar which is most widely used for conversion and is placed as the basic benchmark for the foreign exchange market, it is not surprising that almost all central banks in the world hold US dollars.
The Presence of the BRICS Currency which Challenges the Dominance of the US Dollar
Even though it is still in its early stages, it is believed that the presence of the BRICS currency will change the world economic landscape.
If the BRICS currency has been fully agreed upon by its members, the US dollar currency will no longer be the sole reference for various international trade.
This has the potential to weaken the effectiveness of US economic sanctions, which in turn could cause a decline in the value of the dollar.
The impact of the BRICS currency will trigger economic instability which can affect the welfare of households in the United States.
Additionally, BRICS currencies have the potential to accelerate the de-dollarization trend at the global level.
Final Note
Currently, many countries are starting to look for alternatives to the US dollar.
For example, China and Russia have started trading with each other's currencies.
Meanwhile countries such as India, Kenya and Malaysia are pushing for de-dollarization or signing agreements to trade using local currencies or alternative benchmarks.
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In the Indonesian context, Indonesia is still in the exploration stage to join BRICS as an implementation of the principle of free and active foreign policy.
Although in the exploratory stage, the Indonesian flag has been included in the BRICS currency sample.
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