The dominance of the US Dollar is being tested as the BRICS alliance, comprising Russia, China, India, and other countries, prepares to abandon the use of the USD for cross-border trade and instead develop a new payment system backed by gold and other commodities.
According to Alexander Babakov, a Russian parliamentarian, the new currency will be secured by gold and other commodities, including rare earth elements, although details of the proposed system have not been disclosed.
The discussions around the new payment system are part of a strategy to reduce reliance on the US Dollar or Euro. Babakov further stated that the BRICS summit in August 2023 will be an opportunity to discuss further details about the proposed currency.
The idea of using an alternative currency to the USD in BRICS was first proposed in 2009 with the aim of increasing their influence in the global economy. However, the implementation of a BRICS currency has not yet materialized.
Nevertheless, Russia’s recent actions against Western sanctions have renewed discussions around the topic in 2023. In March, Russian President Vladimir Putin announced a new foreign policy that placed India and China at the forefront of his priorities.
Putin also expressed his intention to prioritize and enhance Russia’s role in international organizations such as BRICS, in order to help reshape the global order into a “multipolar world reality.”
The move away from the USD could have significant consequences for the global economy and the United States. As the world’s reserve currency, the USD is widely used in international transactions and is a key factor in the US economy.
If more countries abandon the use of the USD, the demand for US Treasury bonds and the value of the US Dollar could decline, which could impact the US economy and its standing in the world.
It remains to be seen how the proposed payment system will be developed and whether it will be successful in challenging the dominance of the US Dollar.