Will the BRICS Currency Challenge the US Dollar’s Dominance?

Introduction

The global financial system has long been dominated by the US dollar, which serves as the world’s primary reserve currency. However, in recent years, the BRICS alliance—comprising Brazil, Russia, India, China, and South Africa—has been pushing for greater economic independence and exploring alternatives to dollar dependency. One of the most ambitious proposals is the creation of a common BRICS currency, which could potentially reshape global trade and finance.

But can a BRICS currency truly challenge the dollar’s supremacy? Or is this just another attempt to reduce Western financial influence without a realistic path to dethroning the greenback? In this blog, we will explore the possibilities, challenges, and implications of a BRICS currency in the global economy.

Why the Push for a BRICS Currency?

1. Reducing Dollar Dependence

The US dollar accounts for nearly 60% of global foreign exchange reserves and is used in 88% of international trade transactions. Many nations, especially those in the Global South, are wary of America’s ability to impose financial sanctions (as seen with Russia) and manipulate global markets through Federal Reserve policies.

BRICS nations, particularly China and Russia, have been vocal about de-dollarization, promoting trade in local currencies and exploring alternatives like a gold-backed currency or a digital BRICS currency.

2. Geopolitical Shifts & Economic Power

BRICS represents over 40% of the world’s population and about 32% of global GDP (PPP)—a significant economic bloc. With new members like Saudi Arabia, Iran, Egypt, Ethiopia, and the UAE joining in 2024, BRICS+ now includes major oil producers, increasing its influence over energy markets.

If BRICS introduces a trade-settled currency, it could offer an alternative to the petrodollar system, where oil is predominantly traded in USD.

3. Avoiding US Sanctions & Financial Control

Countries like Russia and Iran, facing heavy US sanctions, are eager to bypass the dollar-dominated SWIFT system. A BRICS currency could provide a workaround, allowing sanctioned nations to trade without relying on Western financial infrastructure.

Can a BRICS Currency Really Compete with the Dollar?

While the idea of a BRICS currency is intriguing, several hurdles stand in the way of it challenging the dollar’s dominance.

1. Lack of Economic & Political Unity

The BRICS bloc includes democracies (India, Brazil, South Africa) and authoritarian regimes (China, Russia), each with vastly different economic policies.

• China wants a yuan-dominated system.

• India is cautious about relying on China.

• Russia seeks an anti-Western currency.

• Brazil & South Africa prefer balanced approaches.

Without a unified vision, creating a stable, trusted currency will be difficult.

2. Trust & Stability Issues

The US dollar’s strength comes from:

• The size and stability of the US economy

• Deep, liquid financial markets

• The rule of law and trust in US institutions

In contrast, BRICS economies face:

• Capital controls (China, Russia)

• Currency volatility (Brazil, South Africa)

• Geopolitical risks (Russia’s war, China-US tensions)

Would investors and central banks trust a BRICS currency as much as the dollar? Unlikely, unless it is backed by gold or a basket of commodities.

3. The Dollar’s Network Effect

The dollar benefits from a network effect—it is entrenched in global trade, debt markets, and central bank reserves. Shifting away requires massive coordination, which even the Euro (backed by the EU’s strong institutions) struggled with.

A BRICS currency would need:

• Widespread adoption in trade

• Deep financial markets for bonds and reserves

• Stable exchange rates

This will not happen overnight.

Potential Models for a BRICS Currency

If BRICS moves forward, what could this currency look like?

1. Gold-Backed Currency

Some suggest a BRICS gold-pegged currency, similar to the old gold standard.

This would:

Provide stability and trust (gold is universally valued)

Reduce inflation risks

But:

Gold supply is limited—could restrict economic growth

Requires all BRICS nations to hold large gold reserves

2. Digital BRICS Currency (CBDC-Based)

A central bank digital currency (CBDC) could facilitate cross-border trade without SWIFT. China’s digital yuan is already being tested internationally.

Pros:

• Faster, cheaper transactions

• Easier to bypass sanctions

Cons:

• Requires massive tech infrastructure

• Raises privacy and surveillance concerns

3. Basket of Currencies (Like the IMF’s SDR)

A BRICS currency could be a weighted mix cof member currencies (yuan, rupee, ruble, etc.), similar to the IMF’s Special Drawing Rights (SDR).

Pros:

• Diversifies risk

• Easier political compromise

Cons:

• Still depends on the strength of individual BRICS currencies

• Less stable than a gold-backed or dollar-pegged system

Will the Dollar Lose Its Dominance? Short-Term vs. Long-Term Outlook

Short-Term (Next 5-10 Years): Minimal Threat

The dollar remains the safest, most liquid currency. No BRICS currency exists yet—only bilateral local currency deals (e.g., China-Russia trading in yuan/ruble). The Euro and Yen are still bigger competitors than any BRICS proposal.

Long-Term (10-30 Years): Gradual Shift Possible

If BRICS:

• Creates a stable, widely accepted currency

• Expands membership to include more economic heavyweights (Indonesia, Nigeria, etc.)

• Establishes commodity-backed trade systems (e.g., oil in BRICS currency)

…then a multipolar currency system could emerge, reducing but not eliminating dollar dominance.

Conclusion: A Slow, Uncertain Challenge

The idea of a BRICS currency is more than just hype—it reflects a growing desire to escape dollar hegemony, especially among sanctioned and developing nations. However, replacing the dollar is incredibly difficult due to its deep-rooted global role.

A BRICS currency is more likely to:

• Serve as a regional trade alternative (like the Euro in Europe)

• Help reduce dollar dependency in specific sectors (e.g., oil trade)

• Complement, not replace, the dollar in global finance

For now, the dollar’s throne is secure—but if BRICS can overcome its internal divisions and build trust in a new currency, the financial world could see a seismic shift in the decades ahead.