Last Updated: 7 July 2023
In a recent interview, the Chief Financial Officer of the New Development Bank of the BRICS economic coalition, Leslie Maasdorp, expressed the alliance’s medium to long-term ambition of establishing a new global currency that could potentially rival the US dollar. The BRICS coalition, comprising Brazil, Russia, India, China, and South Africa, aims to enhance direct trade using their respective national currencies. This move by the influential coalition, representing over 40% of the world’s population and with a combined GDP of $56.6 trillion, could have significant implications for the global financial landscape.
BRICS’ Ambition for a New Global Currency
While BRICS is not currently prepared to introduce a new fiat currency to directly compete with the dominant US dollar, Maasdorp believes that this could change over time. He emphasized that the coalition’s plan to establish an alternative currency is a medium to long-term ambition. Despite this aspiration, Maasdorp acknowledged that the Chinese Renminbi is still far from posing a significant challenge to the predominance of the US dollar. It is worth noting that the New Development Bank currently relies on the US dollar as its anchor currency and employs it in its balance sheet operations.
Growing Interest in BRICS Membership
The BRICS coalition has garnered considerable attention this year, with several nations expressing their interest in joining the group. According to African Ambassador Anil Sooklal, 13 countries from Africa, Latin America, and Asia have either submitted applications or approached BRICS leadership to explore membership opportunities within the association. This increasing interest highlights the perceived significance of the BRICS coalition in global affairs and its potential to shape the future of the global economy.
Economic Outlook and Challenges
The alliance’s plan to establish a new global currency coincides with HSBC Asset Management’s assessment of the world economy, which suggests that the United States is likely to face economic headwinds in the latter part of this year, potentially leading to a global recession. The report also predicts a tumultuous 2024 for Europe, as it grapples with its own economic contraction, while the US economy is expected to experience a downturn in the final quarter of this year.
US Dollar Weaponization and Unintended Consequences
The US dollar’s role as a global reserve currency has come under scrutiny, with some experts arguing that it has been weaponized by the US government, particularly following Russia’s invasion of Ukraine. The weaponization includes imposing sanctions that restrict Russia’s access to its foreign currency reserves, blocking it from the Swift network used for international payments, and targeting its banks and energy companies. While these measures aim to isolate Russia and cripple its economy, they could potentially undermine the US dollar’s status as the world’s reserve currency. This, in turn, may lead to an increased demand for alternative payment systems and safe havens.
Safe Havens: Gold and Bitcoin
As concerns grow over the potential vulnerabilities of the US dollar, investors seek alternative safe havens to protect their wealth. Two prominent options are gold and Bitcoin. Gold, a precious metal that has been considered a safe haven for thousands of years, continues to attract investors during times of uncertainty. Additionally, Bitcoin, the flagship cryptocurrency, has gained attention as a potential safe haven and a transformative force in the financial system. Larry Fink, the CEO of BlackRock, the world’s largest asset manager, recently stated that he believes Bitcoin is “digitizing gold” and has the potential to revolutionize the financial landscape.
The BRICS economic coalition, consisting of Brazil, Russia, India, China, and South Africa, is setting its sights on a medium to long-term ambition of establishing a new global currency that could rival the US dollar. With their combined population representing over 40% of the world’s population and a substantial combined GDP, the BRICS nations pose a significant challenge to the current financial order. As economic headwinds loom for the United States and Europe, the timing of BRICS’ plans and the potential weaponization of the US dollar raise questions about the future of the global financial system. Investors, in turn, seek refuge in traditional safe havens like gold and the emerging digital safe haven of Bitcoin.
As economic uncertainties loom and investors seek alternative safe havens, platforms like Bitcoin Benefit and Bitcoin Evolution provide opportunities for individuals to explore investment options in traditional assets like gold or emerging digital assets like Bitcoin. These platforms offer users access to a wide range of financial instruments, enabling them to navigate the evolving landscape of global currencies and make informed investment decisions.