BRICS members will discuss creating an inter-country payment system to bypass the dollar at a summit, according to bne IntelliNews.
The countries say de-dollarisation is on the rise as the US decision to turn the dollar into a weapon and seize Russian assets has rattled central banks around the world.
The situation worsened after the US shifted its course in December with strangulation sanctions targeting individual banks threatened with secondary sanctions. Several Turkish and Chinese banks withdrew from Russia, severing ties with their Russian clients, which already affected trade turnover.
Meanwhile, after the US Office of Foreign Assets Control (OFAC) imposed sanctions on the Moscow Exchange (MOEX) in June, Russia’s central bank was forced to halt dollar trading. This caused a liquidity crisis for the yuan, the main foreign currency used in Russia after the yuanisation of the Russian economy in 2022.
The international consequences of those developments are already visible. The dollar’s share of world reserves reached a 30-year low and continued to fall. Russia had already sold almost all of its dollars before the war and now has some $300bn in unfrozen reserve assets, about half of which is in yuan and gold. Central banks around the world are also increasing their gold holdings, driving gold prices to record highs.
China gets rid of US dollar
The only another reserve currency to experience a decline over the period is the yuan, whose share fell to 2.14 per cent from 2.45 per cent a year earlier. Non-reserve currencies have been the main beneficiaries, with their popularity among central banks reaching 4.25 per cent.
China held about $1.1 trillion worth of US Treasury securities in mid-2021, but the figure fell to about $835 billion by mid-2023. China is seeking to diversify its foreign exchange reserves away from US assets by shifting its focus to gold, the euro, and investments in other currencies and commodities.
Russia and China have also switched to settlements in national currencies for almost all trade transactions worth $186bn in the first half of 2024. Moreover, Russia and China will resume barter trade for the first time in 30 years this autumn and abandon money altogether to avoid the impact of US sanctions on their banking systems, according to bne IntelliNews.
Economy is shifting
Russia is allegedly preparing for this and has passed a number of laws to regulate digital currencies since the beginning of this year. In the summer, the Central Bank introduced trials of its digital ruble in the Russian banking sector, and in September it first tested the settlement of an international trade transaction using cryptocurrency as a means of payment.
Most countries in the Global South voiced interest in the idea and proposed a blockchain-based BRICS system in March. According to Russian officials, the coin would be called BRICS Pay. It would not just be a new cryptocurrency coin, but an analogue of the SWIFT messaging system that allows for international payments.
This will allow BRICS countries to conduct transactions in national currencies, but digitally. The system will combine digital versions of the ruble, yuan, rupee and other currencies. However, experts believe that the system will not be operational before 2028.
