A new cross-border payment system proposed by BRICS nations could potentially replace traditional methods of trade settlements among member countries and emerge as a formidable alternative to the SWIFT system, experts have indicated. During Russia’s presidency of BRICS in 2024, discussions around the BRICS Cross-Border Payment Initiative have gained traction, focusing on leveraging advanced technologies to create a multinational payment mechanism.
Russian Finance Minister Anton Siluanov recently presented a report outlining the initiative’s objectives, which include enhancing the share of national currencies in cross-border transactions and establishing interoperability among the various national payment systems of BRICS members. If implemented, experts believe this system could significantly weaken US dollar dominance and lead to widespread panic in developed countries reliant on dollar transactions.
Einar Tangen, a senior fellow at the Taihe Institute in Beijing, remarked, “If implemented, it would be a major alternative to SWIFT, and the end of US dollar hegemony.” He predicts that this shift could work in favor of the BRICS Bank, as countries accustomed to dollar reliance may react defensively to a shift in financial structures.
Warwick Powell, an adjunct professor at Queensland University of Technology, highlighted that a variety of national currency-based trade settlement mechanisms are already in place, supported by emerging institutions such as currency swap agreements. He emphasized that while alternative interbank messaging systems like China’s Cross-border Interbank Payment System and Russia’s System for Transfer of Financial Messages exist, a cohesive BRICS payment system could streamline and enhance efficiency in cross-border transactions.
As the group pursues a de-dollarization strategy, discussions about a potential common currency for BRICS transactions have surfaced. In 2023, Russian officials suggested that transitioning to settlements in national currencies could be a precursor to introducing a new form of currency for inter-BRICS trade. State Duma Deputy Chairman Alexander Babakov noted that the emergence of a single currency is possible, but Russian President Putin recently clarified that a formal national currency is not currently under consideration.
The desire among BRICS members to maintain economic sovereignty plays a crucial role in these discussions. Powell explained that the lessons from the European Union’s experience with the euro serve as a cautionary tale for BRICS members, who are keen to avoid the pitfalls of a single currency system that may disadvantage weaker economies.
Experts like Tangen emphasize that the goal should not be to establish a single currency to replace the US dollar, but rather to create a secure and impartial alternative accepted by central banks within BRICS. Potential strategies for establishing a reference value for currency exchanges include pegging to gold or using a market-based approach centered on the dollar.
The BRICS initiative aims to build a payment system that would reduce transaction fees and improve payment efficiency while ensuring that each member nation retains control over its economic sovereignty. Tangen also suggests that using a distributed ledger system among central banks could provide a fair and transparent mechanism for currency exchanges.
As BRICS continues to grow and expand its membership, including recent additions such as Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia, the proposed cross-border payment system stands to enhance cooperation and reduce reliance on Western financial structures. With the upcoming BRICS summit scheduled in Kazan from October 22-24, these developments will be pivotal in shaping the future of international trade and finance within the bloc.
