The upcoming BRICS summit in South Africa has sparked several speculations but mostly revolving around a new currency for the trading bloc. With the United States dollar fighting to retain its global reserve currency status amid de-dollarization, the speculation of a gold-backed currency continues.
Furthermore, the United States Fed prints money out of thin air and only benefits its residents, thus burdening other countries with its debts. Meanwhile, the BRICS member states are poised to benefit from the trading agreements that involve internal currencies as they fight to reduce inflation effects.
New Currency For BRICS
Earlier this month, Leslie Maasdorp, the Vice President and Chief Finance Officer at New Development Bank, formerly the BRICS Development Bank, announced that the movement is not focused on creating a single currency but encouraging intertrading with respective fiat units. However, Maasdorp noted that the BRICS movement is looking in the long term to replace the United States dollar from its FX market. Maasdorp highlighted.
The development of anything alternative [to the US dollar]is more a medium to long-term ambition.
In the latest developments, the Russian Embassy in Kenya confirmed that the BRICS countries are planning to introduce a trading currency backed by gold. The move could significantly accelerate the de-dollarization process, which undeniably has long-standing effects on global geopolitics. Moreover, a gold-backed currency could significantly undermine a paper-printed currency backed by the government’s policies
The fact that central banks from 41 different nations have resolved to apply for a BRICS membership means a lot of gold for the currency.
However, there are a lot of logistics involved in developing a gold-backed currency. Furthermore, very few nations could be willing to trade their gold for a fiat currency printed out of thin air. Secondly, the United States still has a huge intake for gold bars as it buys them with its paper-printed money. The possibility of people swapping their hard currencies for the gold option and selling to the United States at a higher price cannot be ignored
Such a move could make the United States even more dominant in the global reserve currency. As a result, experts have been arguing that the BRICS movement could look into a different gold standard that is better at storing value, Bitcoin.
Bitcoin as Gold Standard
Bitcoin has been touted as a favorite among institutional investors and some countries for its ability to store value and future growth prospects. According to BlackRock CEO Larry Fink, Bitcoin is digitizing the gold standard and its mainstream adoption is imminent.
Consequently, the BRICS could use Bitcoin in place of Gold and still have their gold reserves intact. The fact that nations can purchase more Bitcoin with their fiat money makes it easier for the BRICS movement to use it instead of gold. Additionally, Bitcoin is digital and easily transferable between different users on the blockchain.
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