The BRICS nations are cooking up something intriguing that could shake up global trade in a big way, a gold-backed digital currency, to lessen their reliance on the U.S. dollar and potentially lower transaction costs while reducing exchange rate volatility.
Gold backed. Digital. Dollar-killer?
An article by Alexej Jordanov from Goldrepublic shared that BRICS—comprising Brazil, Russia, India, China, and South Africa—are exploring this new currency as a way to sidestep the dollar’s dominance in international trade.
With geopolitical tensions rising, especially after Russia was booted from the SWIFT payment network, these countries are keen on finding alternative ways to settle transactions.
Jordanov suggests that if they go ahead with this gold-backed currency, it could be pegged to both gold and a mix of BRICS currencies.
Plus, they’d use distributed ledger technology, aka blockchain for added transparency and security.
Economic changes
So why does this matter? Well, BRICS nations account for about 40% of the global population and generate over 30% of the world’s GDP—just a hair more than the G7 countries, but despite their economic heft, the dollar still reigns supreme in global trade.
Intra-BRICS trade has been on the rise too, increasing by 56% since 2017 and making up 37% of total transactions within the bloc in 2022.
Jordanov argues that a gold-backed currency could cut transaction fees and reduce exchange rate risks.
Imagine saving 1-2% on transaction costs! It sounds small, but we aren’t talking about groceries but countries doing business.
If just half of intra-BRICS trade shifted to this new currency, we’d be talking about billions in savings that could fuel economic growth.
Here’s where it gets interesting, because by tokenizing their gold reserves, each digital unit would be backed by real assets stored in secure vaults, and regular audits would keep everything accountable.
Smart contracts could adjust currency weightings based on trade patterns and economic conditions, allowing for real-time settlements that build trust among users.
Shiny rocks
Currently, BRICS nations hold about 5,700 tonnes of gold—around 16% of global reserves—compared to the G7’s 17,500 tonnes or 49%.
While this gives them a solid foundation for a gold-backed currency, Jordanov warns that implementing such a system won’t be a walk in the park at all.
Coordination among member nations is pretty important, along with investments in tech infrastructure.
Plus, geopolitical hurdles like potential sanctions could complicate things further.
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