The annual BRICS Summit in Kazan is winding down. While the much-touted BRICS digital currency did not materialize, some members expressed grievances with the Western world and called for alternative payment systems between member states.
Front and center was a call for independent payment systems. Russian President Vladimir Putin, Brazilian President Lula da Silva, and Iranian Ambassador Kazem Jalali called for payment systems free from Western influence.
Jalali argued that the existing banking systems impose regulations that only benefit Western countries. He called for alternative banking mechanisms and an independent financial messaging exchange system, citing the existing system’s “biased standards” regarding counter-terrorism financing (CTF) and other financial regulations.
Brazil’s Lula da Silva couldn’t attend the Kazan Summit in person due to medical issues, but he called for similar measures. He noted how the block had already built the BRICS Development Bank as an alternative to the failing Bretton Woods systems.
To no great surprise, Russia’s Putin echoed the same sentiment. Still reeling from the “theft” of $300 billion in Russian foreign exchange after he invaded Ukraine in 2022, he told BRICS members they must develop alternative banking systems to stop the United States from using the dollar as a political weapon.
“The dollar is being used as a weapon. We really see that this is so. I think that this is a big mistake by those who do this.” – Vladimir Putin
Russia is leading the charge for an alternative system
Having lost the most from sanctions and foreign exchange freezes after the invasion of Ukraine, it’s probably no surprise that Russia is at the front of the pack when it comes to pushing for alternative BRICS systems.
Indeed, most recent rumors about the BRICS currency have come from Russia. Putin’s moves to legalize and regulate digital currencies and offer Bitcoin miners excess energy, as well as a recent paper released by the Bank of Russia and others, have led to heated speculation in recent months.
Alas, no BRICS digital currency was unveiled at the Kazan Summit. For now, Russia will have to continue using BTC and other digital currencies to evade sanctions while BRICS turns up the dial on using national currencies between members.
All told, the Kazan BRICS Summit was somewhat of a letdown from a news perspective; it was basically a grievance fest against the West with more calls for what some members have already been pushing for since 2010 in some form or another.
Could de-dollarization benefit the United States?
De-dollarization is a trend and is set to accelerate, but there was nothing in Kazan that would make anyone in Washington or elsewhere worry. With so many different political interests within BRICS itself, it’s unlikely any payment system it does develop will pose a serious challenge to the current one.
However, if BRICS does manage to de-dollarize in the coming decades, it’s not all bad for the United States. While having the global reserve currency gives America power in the form of a strong currency and the ability to wield sanctions, it also comes with drawbacks.
How so? Having the world reserve currency leads to the Triffin Dilemma. This conflict of interest means that to shore up global liquidity, the U.S. has to run trade deficits, providing the world with dollars. If it stopped doing so, the world economy could plunge into contraction, causing global economic instability. Essentially, the Federal Reserve and the U.S. government must constantly try to balance the needs of the U.S. with the needs of the world, and its decisions can have global consequences.
De-dollarization would also inevitably weaken the USD, but this isn’t all bad either. Given America’s pivot back to manufacturing at home, a weaker dollar could help make its exports and services more competitive. This would benefit sectors like manufacturing and agriculture the most.
As always, there are trade-offs, and de-dollarization is a huge change with many potentially unpredictable consequences. Regardless, even if BRICS pulls it off and convinces other countries to go the same way, there will be opportunities for the U.S. and the rest of the Western world, too.
Watch: New age of payment solutions
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