BRIC Nations May Introduce Their Own Cryptocurrency
BRIC nations may introduce their own Crypto currency:
- One of world’s largest economic blocs is in talks to introduce their own cryptocurrency in an attempt to move away from Dollar dependence
- Previously reluctant to accept the digital currency, Russia and China finally plan to deliberate how BRICS can benefit from the technology.
Not so long ago, crypto-currency was seen as a rebellious attempt to shake the governing structure of nations, particularly regarding fiat currency manipulation, around the world. Economic and financial experts feared that the anonymous nature of cryptocurrency transactions make this system prone to money-laundering and terrorism financing. But like any great invention, blockchain technology found its way into the global sphere. Clearly the benefits outweigh the downsides.
The increasing volatility of the national currencies of the BRICS (Brazil, Russia, India, China, and South Africa) bloc against the US dollar has ignited the idea of an independent currency that can be used for trade settlements and as a legal financial instrument for transactions.
Talks for a unified currency among BRICS nations aren’t new. Previously, Russia’s SFPS (System for Transfer of Financial Messages) and China’s CIPS (Cross-Border Inter-Bank Payments System) were launched to tackle Dollar dependence.
The BRICS Business Council, the body responsible for planning, identifying problems and recommending solutions for any economic bottlenecks faced by the BRICS, discussed the possibility of using cryptocurrency as bloc’s central transaction system.
Leader Of The World?
BRICS is a major economic and geopolitical bloc with more than 40% of the world's population. The member nations also have 23.2% of global GDP and 32% GDP.
One would argue that these numbers should make them the world’s leading economic bloc which also happens to have the best resources. But things are not that easy for BRICS. The five countries spread across three continents share some common problems, like poverty, internal political issues and most importantly their dependence on the US Dollar. The international sanctions on Russia and trade wars of China and India with the US have weakened their development goals. However, technology may solve this problem for them. The use of cryptocurrency as a means of trade settlements could pave the way for the BRICS.
Blockchain Acceptance – Path to Independence
Russia is facing a number of sanctions by the US and EU after the Ukrainian crisis, which has affected their trade and arms deals. Settling bilateral trade payments in a currency such as the Euro would reduce the influence of the US in any bilateral agreements.
While it is still unclear what proposed cryptocurrency would look like, they certainly would not be tied to the US Dollar in any way. With the bloc’s access to gold, (largely from to South Africa), the most viable option is to link the cryptocurrency to gold.
With the commitment of Russia and China to blockchain technology, it is only a matter of time before the BRICS settle on either a central digital currency or individual cryptocurrencies exchanged on a central blockchain exchange that is controlled centrally by BRICS.
Impact Of The Decision
- China, as the leader of the BRICS, can increase its dominance in the global market by weakening the US currency and tapping the opportunity of establishing its own global financial system.
- Russia can minimize or even eliminate the effects of American sanctions with the help of an internationally accepted cryptocurrency backed by some of the world’s major countries.
- Brazil already has decreased its export bill to $140 billion from $219 billion in just one year. This means the potential for using the BRICS cryptocurrency could be huge. They may also be able to make deals with Russia without having to worry about sanctions or designations.
- India is combating poverty and fighting deep-rooted corruption. The cryptocurrency can take care of these problems for it by giving online access to the digital currency to every citizen. India’s most prominent strategic and economic partner is Russia. India is particularly dependant on Russia for their energy, trade and arms deals. These would be able to proceed without interference.
- South Africa would also benefit from a gold-based cryptocurrency as would it promote its role among the partners’ nations more. Another problem faced by South African authorities is that of undocumented workers and residents. This may be solved by registering them digitally and providing them digital access.
There is no doubt that any independent financial system, digital or traditional, used by BRICS nations would help them politically and economically, but there are also challenges before implementation could be successful. The new system could offer the possibility of manipulation, critics fear. BRICS nations must successfully agree on how they would like their cryptocurrency platform to work. This is the first step.