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- The US dollar is under threat as BRICS looks forward to finding an alternative currency.
- It is rumored that Bitcoin could be considered for this move as it ticks all the boxes for international trade.
The US Dollar has been the world’s primary reserve currency for more than 60 years now and counting. However, its dominance is currently under threat as the BRICS alliance which originally comprised Brazil, Russia, India, China, and South Africa is working on means to find alternatives.
In the recent summit in South Africa, new member countries including Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates joined the organization, making the alliance stronger and more popular. Prior to its recent summit, it was reported that 40 more countries had shown interest in the organization.
The decision to sideline the US Dollar stems from the use of the currency as a tool to impose sanctions, of which Russia is the latest victim. In a recent meeting, Brazilian President Luiz Inacio Lula da Silva proposed the idea of creating a single BRICS currency to be transacted among member states. Even though no serious effort is underway to introduce BRICS currency, some experts believe that a single currency is imminent.
It is important to note that the role of the US dollar as a primary world reserve currency certifies the leadership authority of the US. This implies that the de-dollarisation would affect its access to capital, increase borrowing costs, lower stock market values, etc.
What Happens When BRICS Overthrows the USD
Over the years, the dollar has been used as the preferred payment of one of the most dominant commodities in global trade – oil. Dollarization gives the US the power to make international financial decisions and force the global community to adapt. One important impact of the de-dollarization is that countries such as Iran and Russia could be immune from sanctions coupled with the weak implications on the US economy.
Once the BRICS successfully overthrows the US Dollar, its demand would certainly be lower and could make exports cheaper. In this case, the confidence in its stability could be largely affected. In the long run, there would be a higher interest rate which would affect the stock market and make borrowing more difficult. Another situation that should be worrying to the US is that sizable economies such as Indonesia and Turkey were left out of the countries admitted this year. The movement currently has the six world’s top oil producers – Saudi Arabia, Russia, China, Brazil, Iran, and the United Arab Emirates. For now, there is little information on the specific admission criteria.
Following the decision to settle on a common currency, rumors have emerged that BRICS could consider Bitcoin for trade due to its convenience. Bitcoin exists as a revolutionized financial system with fast settlement time, lower transaction fees, a high level of security, transparency, convenience, and easily accessible. A decision to adopt Bitcoin could lead to an influx of billions of dollars into the market and could set the price up for another bull run.
As of press time, Bitcoin was trading at $26,238.49. In the last seven days, the asset has fallen by 3.5 percent in the last 7 days.
