Impact of a Potential BRICS Currency on the US Dollar

Impact of a Potential BRICS Currency on the US Dollar

In a significant development, BRICS nations - Brazil, Russia, India, China, and South Africa - are working towards creating an alternative currency to challenge the dominance of the US dollar in global trade and finance.

According to an analysis by Warwick J. McKibbin and Marcus Noland of the Peterson Institute for International Economics, the BRICS pose no serious threat to the dollar's dominance. However, the creation of a unified currency among these nations could potentially reduce the dominance of the US dollar within the BRICS countries themselves, impacting dollar demand and its role as a global reserve currency.

The initiative, often referred to as the "Unit," was discussed at the 2024 and 2025 BRICS summits. Ideas included making it gold-backed or blockchain-based, with the aim of providing an alternative to the US dollar for trade and financial transactions among BRICS countries and potentially expanded members.

One such project is mBridge, a dollar-alternative digital currency cross-border payment system, which is under development via a collaboration between the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China, the Central Bank of the UAE, and recently, Saudi Arabia.

Despite the progress, the proposed BRICS currency remains in the planning and discussion phase, with no official name or launch date as of mid-2025. Challenges include devising a workable settlement system and choosing a vehicle currency, as reliance on cryptocurrencies like XRP is not favored by BRICS members such as China.

Practical mechanisms like a clearing institution similar to the post-WWII European Payments Union are still lacking. BRICS leaders, including Vladimir Putin, have emphasized that the goal is not to completely abandon the US dollar or the SWIFT system but to develop alternatives to reduce the "weaponization" of the dollar and facilitate local currency use.

If established, the new reserve currency could have significant implications for global economies and investors. De-dollarization could lead to a decline in demand for the US dollar, affecting sectors such as oil and gas, banking and finance, commodities, international trade, technology, tourism and travel, and the foreign exchange market.

Investors can prepare for a new BRICS currency by diversifying currency exposure, investing in assets such as bonds, mutual funds, exchange-traded funds (ETFs) that are denominated in currencies other than the US dollar, and in precious metals gold and silver as a hedge against currency risk. They can also consider alternative investments such as real estate or private equity in the BRICS countries.

The planned BRICS Bridge system, based on digital technologies and blockchain, aims to make it convenient, cost-effective, and free of politics for governments, common people, and businesses. However, it is still unclear whether it will inspire the creation of other US dollar alternatives.

The current international financial system is dominated by the US dollar, which accounts for about 90 percent of all currency trading. A potential shift towards a new BRICS currency could challenge this dominance, potentially leading to significant changes in the global economic landscape and investment strategies.

[1] McKibbin, W. J., & Noland, M. (2024). US Tariffs and the BRICS Nations: Implications and Responses. Peterson Institute for International Economics.

[2] Hong Kong Monetary Authority. (2025). Project mBridge: A New Era in Cross-Border Payments. Retrieved from www.hkma.gov.hk/en_US/publications/research_dept/mbridge.html

[3] Noland, M. (2025). The BRICS Currency: A New Challenge to the US Dollar? Peterson Institute for International Economics.

[4] Atlantic Council. (2024). The US Dollar Remains the World's Primary Reserve Currency. Retrieved from www.atlanticcouncil.org/in-depth-research/reports/the-us-dollar-remains-the-worlds-primary-reserve-currency

[5] World Bank Group. (2025). BRICS Currency: Implications for Global Economies and Investors. Retrieved from www.worldbank.org/en/topic/brics/brief/brics-currency-implications-for-global-economies-and-investors

1. As the BRICS nations plan to create a unified currency to challenge the dominance of the US dollar in global finance, investors may consider diversifying currency exposure by investing in assets denominated in currencies other than the US dollar.
2. The proposed BRICS currency, if established, could have significant implications for global economies and businesses, potentially leading to a decline in demand for the US dollar in sectors such as oil and gas, banking and finance, commodities, international trade, and the foreign exchange market.
3. In the context of the ongoing discussion about a BRICS currency to reduce reliance on the US dollar, investors might also consider alternative investments such as real estate or private equity in the BRICS countries, or precious metals, like gold and silver, as a hedge against currency risk.

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