A seismic shift reshaping the global financial landscape and nature of money is underway. The BRICS nations represent an emerging Global South who seek to reform the international economic system while reducing dependence on the U.S. Dollar and Western dominated financial institutions. BRICS (Brazil, Russia, India, China and South Africa) a bloc of developing economies, formally expanded membership to Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE) in January 2024. Combined, BRICS nations represent 45.2% of the world population, 36.7% of global GDP at purchasing power parity, and own more than $1.3 trillion in U.S. treasuries. The sixteenth BRICS Summit in Kazan from October 22 to 24, 2024 featured 36 nations in attendance with most represented by heads of state. Part of the agenda involved discussion on the creation of financial infrastructure allowing BRICS nations to trade directly with each other and settle payments in their own currencies. Due to the escalation of financial sanctions this decade, several countries have expressed intent to diversify from U.S. Dollars. Forming the backbone of this new financial infrastructure is blockchain, an immutable database software, which is a type of Distributed Ledger Technology (DLT) underneath the hood.
BRICS Pay is a digital payment system for cross-border transactions between BRICS members in local currencies. Launched by the BRICS Business Council in 2018, this blockchain based payment system supports digital currencies and stablecoins pegged to the currencies of BRICS members. For a fraction of a cent, stablecoins facilitate transactions at the speed of the internet. BRICS Pay was demonstrated at the BRICS Business Forum on October 17 and 18. Attendees received a promo card preloaded with 500 rubles to purchase coffee, tea, and souvenirs from participating vendors at the venue. To realize the BRICS Pay project, the BRICS Pay Consortium, a collection of financial, legal, technological, and consulting firms will operate “under the principles” of a Decentralized Autonomous Organization (DAO). A paradigm shift from centralized hierarchical structures, DAOs are a decentralized network of governing bodies, with no central headquarters.
BRICS nations represent 45.2% of the world population, 36.7% of global GDP at purchasing power parity, and own more than $1.3 trillion in U.S. treasuries.
The BRICS UNIT, an “apolitical” alternate global currency for BRICS members is currently under discussion. The UNIT digital token represents a proportional share of the UNIT basket, containing 40% gold and BRICS currencies. The UNIT token is part of the UNIT ecosystem, an open platform relying on blockchain technology to eliminate capital controls, exchange rate manipulation, and ensure transparency. The UNIT ecosystem will be open to Decentralized Exchanges (DEXs) and digital platforms from commercial and Central Banks worldwide. DEXs are experiencing rapid adoption, with the Top 20 projects executing around $1.4 trillion in trading volume over the course of 365 days. A basket of currencies serving as a unit of account is nothing novel. The Special Drawing Rights (SDR) launched by the International Monetary Fund (IMF) in 1969 is an international reserve asset, freely exchangeable for currency by holders. This basket of currencies is composed of the U.S. Dollar, Euro, Chinese renminbi, Japanese yen, and British Pound sterling.
Central Banks are working towards updating the legacy financial infrastructure worldwide. A Central Bank Digital Currency (CBDC) is a digital currency backed, issued, and regulated by a Central Bank. A total of 134 countries, representing 98% of global GDP, are currently exploring CBDCs, with retail deployment in three countries, including the Bahamas, Jamaica, and Nigeria. There are currently 44 ongoing CBDC pilots, including the digital euro and yuan, with the total transaction volume for the digital yuan reaching $986 billion in June 2024. Project mBridge, a “multi-CBDC bridge” exploring real-time, peer-to-peer, cross-border payments and settlements, recently raised concerns in the Bank for International Settlements (BIS). General Manager of the BIS Augustin Carstens stated, “The BIS does not operate with any countries, nor can its products be used by any countries that are subject to sanctions”. Accordingly, the BIS “graduated out” of the project. As of October 2024, mBridge is run by the Central Banks of China, Hong Kong, Thailand, Saudi Arabia, and the UAE, with 32 observing members and 39 commercial banks participating in the MVP stage. Project mBridge is compatible with the Ethereum Virtual Machine (EVM) and leverages technology developed by the Hyperledger Foundation.
The journey of money from physical coins to digital tokens stored on decentralized ledgers reflects society's ongoing quest to democratize finance. As we stand on the cusp of this new era in finance, it's clear that blockchain technology will play a pivotal role in shaping the future of money and economic interactions worldwide.
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