Rumors have swirled around the potential unveiling of a BRICS economic alliance currency, thought to be called “the unit,” that will put further pressure on the U.S. dollar amid rising de-dollarization efforts from countries looking to increase economic sovereignty.
It’s hardly the first time America’s adversaries have attempted to knock the U.S. dollar away from its status as the world’s reserve currency, however, this time BRICS is receiving enough global interest to potentially make their efforts a reality.
BRICS, the acronym for the five original members of the economic summit - Brazil, Russia, India, China, and South Africa - is believed to have received interest in the rumored currency from more than 30 countries.
It’s not the first time
After America moved away from the gold standard under Richard Nixon in the 1970s, the U.S. convinced Middle Eastern countries to commit to trading oil in dollars. While the currency lost its physical-asset-backed protection, the use of the currency in oil trading, which is a highly global market, helped solidify the dollar’s status as the strongest currency in the world.
That is, until six years ago when China unveiled the petroyuan, and began making oil purchases in Chinese yuan.
China’s share of world trade has tripled since the turn of the century, and payments made in yuan are becoming more popular.
While the yuan has become the third-most-used currency in SWIFT, the global payment network, it still only accounts for just 5.3% of global trade, compared to 5.9% in euros and 84% in dollars.
Rising tensions in 2022 that began with Russia’s invasion of Ukraine and, now rapidly heightened tensions in the Middle East, have led to further pressure on the dollar.
The month after Russia’s invasion, Chinese President Xi Jinping visited Saudi Arabia to discuss pricing some of the kingdom’s oil sales in yuan and at the end of the year Jinping announced China will continue to buy large amounts of oil from the Saudis and will use the yuan in trade.
At the same time, Russia and its allies have been forced to move away from the U.S. dollar thanks to sanctions enacted by the West and, in turn, rumors about a BRICS-based currency have began to swirl.
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A new currency
Reports have since suggested the potential new BRICS currency will be 40% backed by gold and 60% backed by reserves in member currencies.
Meanwhile, reserve banks across the globe have added large amounts of gold to their coffers in recent years, further fueling speculation of a new gold-backed currency. Gold prices have risen exponentially in 2024 and is currently trading at about $2,650 an ounce.
While most experts don’t expect the new currency to be fully unveiled during this month’s BRICS alliance summit, they expect major headway in planning and discussions.
India, an original alliance member, has been speculated to be caught in the middle of the rumored currency creation - not wanting to abandon its U.S ties but still supporting some form of new world reserve currency.
Last month, Russian President Vladimir Putin confirmed that Russia and its allies were discussing the creation of a new currency, but has yet to divulge any meaningful details.
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