The upcoming BRICS summit in Kazan, Russia, from October 22-24, is highly anticipated as it could mark a significant shift in global economic strategy and currency policies. As the group expands to include new members, such as Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates, discussions may advance on establishing a common BRICS currency, potentially reshaping international finance.
BRICS, which now comprises nine member states—Brazil, Russia, India, China, South Africa, and the newly inducted nations—has held annual summits since 2009. The gatherings have mostly been platforms for dialogue, but the organization is now seeking to make a more substantial impact on the global stage.
Historical Moves Towards a BRICS Currency
- 2009: The first BRICS summit in Yekaterinburg, Russia, included a declaration for a new world reserve currency, questioning the U.S. dollar’s dominance for the first time.
- 2014: During the sixth summit in Fortaleza, Brazil, BRICS outlined a vision for deeper political and economic cooperation through the Fortaleza Declaration.
- 2022: The 14th summit, led by China, saw Russia announce plans for a new reserve currency based on a basket of BRICS currencies, aiming to challenge the existing financial order.
- 2023: At the Johannesburg summit, the group invited five new countries to join, signaling a push for greater influence in global economic affairs.
Kar Yong Ang, a financial market analyst at Octa Broker, notes that this year’s summit in Kazan could be pivotal for BRICS. “The discussions may yield significant progress in developing a unified currency, which would be one of the most ambitious financial projects since the euro’s launch,” he said.
Will a BRICS Currency Be Unveiled in Kazan?
While an official launch of a new currency is not expected at the Kazan summit, analysts predict meaningful steps forward in its development. The primary goal is to create a digital currency for efficient cross-border transactions, rather than establishing a full-fledged monetary union similar to the Eurozone. “A common currency is unlikely to replace national currencies anytime soon,” explains Ang. “The focus is on providing a digital solution for trade settlements.”
The envisioned digital currency would operate on the mBridge platform, supported by the Bank for International Settlements, allowing central bank digital currencies (CBDCs) to settle transactions without relying on the U.S. dollar. This shift could reduce transaction costs, facilitate seamless payments, and provide BRICS members greater independence from Western financial systems.
Potential Structure of the BRICS Currency
Research suggests the currency, possibly named the mBridge unit, would be backed by a combination of gold and a basket of BRICS member currencies, with a proposed ratio of 40% gold to 60% national currencies. Given China’s economic size, the yuan may hold the largest share in this basket, although India’s position remains uncertain due to ongoing tensions with China.
Implications for Global Markets
If BRICS successfully advances its digital currency platform, it could reduce the demand for U.S. dollars in international trade while boosting demand for gold. BRICS countries have already increased gold purchases and decreased holdings of U.S. Treasury bonds, aligning with this potential shift. Gold prices have reached new highs since early 2024, reflecting market anticipation of these changes.
The broader impact on the global financial system could be profound, challenging the U.S. dollar’s status as the world’s primary reserve currency. While the greenback’s dominance is not yet threatened, BRICS’ initiatives may gradually alter the landscape of international trade and finance.
