BRICs, the five-nation group consisting of Brazil, Russia, India, China, and South Africa, has announced plans to create a blockchain-based crypto payments system.
The payment system is part of a plan to increase the role of BRICs in the international monetary system.
BRICS Announces Blockchain-based Payments System
BRICS believes the blockchain-based payments system will foster deeper ties, enhance economic cooperation, and help consolidate emerging economies to counter the political and financial dominance of developed Western nations. The payment system will also help further reduce the reliance on the dollar for international transactions. Yuri Ushakov, a Kremlin Aide, spoke about the proposed payment system, stating,
“We believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain. The main thing is to make sure it is convenient for governments, common people, and businesses, as well as cost-effective and free of politics.”
BRICS also said it wants the payment system to be government-friendly, business-friendly, and convenient for regular citizens. If the system is successful, it will be hugely beneficial for several institutions, ranging from governments and banks to common citizens.
Taking On The Dollar
Ushakov confirmed that the payments system will use state-of-the-art technology that will incorporate digital assets and cryptocurrencies on the blockchain. The system will allow BRICS to take on the US Dollar, allowing member nations and other developing countries to settle cross-border transactions using the new mechanism. Additionally, it will add considerable pressure on the US dollar, leading to a fluctuation in its supply and demand in the global market.
However, details of the payments system, like whether BRICS would use an existing platform or develop its own blockchain, have not yet been disclosed. There are also no details about a timeline regarding the launch of the new BRICS payment system.
Contingent Reserve Arrangement
The creation of a blockchain-based payment system is a natural evolution of the BRICS Contingent Reserve Arrangement (CRA). The CRA was established in 2014, establishing a framework that provided liquidity and support to facilitate the balance of payments between members. BRICS members committed $100 billion to the CRA, with contributions ranging from $41 billion by China to $5 billion by South Africa. The CRA’s aim is to reduce the dependence on US Dollar-denominated assets and arrangements while strengthening the overall global financial safety net.
“Work will continue to develop the Contingent Reserve Arrangement, primarily regarding the use of currencies different from the US dollar.”
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