BRICS member nations propose creating a cryptocurrency for payment settlements

A group consisting of five emerging markets including Brazil, Russia, India, China, and South Africa, recently revealed a plan to create a unified payment system that settles transactions in a single cryptocurrency. Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), a $10 billion sovereign wealth fund by the Russian government who proposed the plan suggested that the BRICS cryptocurrency will not be a full-fledged settlement tool, rather “Most likely, it will be like certain obligations that can be transferred from one legal entity to another to confirm that the recipient will have claim rights, and the contractor will have obligations for a specific amount. It will not be money, we can say that it will be a paperless document flow to facilitate transactions.”

Why it matters:

• BRICS consists of the most powerful emerging economies in the world. The group is explicitly attempting to reduce its reliance on the U.S. Dollar and United States financial system in facilitating international trade. The Economic Times reported yesterday that three of the BRICs members, China, Russia, and India, are also “exploring an alternative to the US-dominated SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment mechanism in a bid to smoothen trade with countries facing American sanctions.”
• Sovereign interest in cryptocurrencies has risen dramatically in 2019 since the announcement of Facebook’s Libra. In the past month alone there have been numerous announcements of government cryptocurrency projects. This latest revelation adds more fuel to what is shaping up to be a digital currency arms race as many nations are slowly recognizing the opportunity to re-architect the international monetary system using blockchain technology.