The Chief Financial Officer of the New Development Bank of the BRICS economic coalition indicated a “medium to long-term ambition” to establish a new global currency, potentially rivaling the US dollar in a recent interview.
The alliance, formed by Brazil, Russia, India, China, and South Africa, is reportedly looking to enhance direct trade in their respective national currencies, according to Chief Financial Officer Leslie Maasdorp.
BRICS is an acronym for the regional economies of these five countries, which are considered fast-growing and influential in global affairs, and encompasses countries with a combined population of over 3 billion people, representing over 40% of the world’s population. The countries in the group have a combined GDP of around $56.6 trillion.
In his interview with Bloomberg TV, Maasdorp highlighted the coalition isn’t currently prepared to roll out a novel fiat form to compete with the dominant global reserve currency, but added he believes this could change over time. He said:
The development of anything alternative [to the US dollar] is more a medium to long term ambition.
He further pointed out that the Chinese Renminbi remains significantly distant from becoming a significant challenge to the dollar’s predominance. Moreover, Maasdorp underlined the bank’s dependence on the US dollar for its operations, saying it has the US dollar as its anchor currency, and uses it in its balance sheet.
The BRICS coalition has drawn significant attention this year from several nations interested in joining the group. According to African Ambassador Anil Sooklal, 13 countries from Africa, Latin America, and Asia have either submitted applications or officially approached the BRICS leadership to seek membership within the association.
The alliance’s plans to establish a new global currency come at a time in which an assessment of the world economy by HSBC Asset Management warned that the United States is set to face economic headwinds in the latter part of this year, in what could potentially usher in a global recession.
The firm also foresees a tumultuous 2024 for Europe, grappling with its own economic contraction, while the U.S. economy is anticipated to hit a downturn in the last quarter of this year.
Many have argued that the U.S: dollar as been weaponized by the U.S. government after Russia’s invasion of Ukraine, through the use of sanctions that include blocking Russia from accessing its foreign currency reserves, banning it from the Swift network that facilitates international payments, and targeting its banks and energy companies.
These measures aim to isolate Russia from the global financial system and cripple its economy, but according to some analysts, the dollar’s weaponization could have unintended consequences, such as undermining its status as the world’s reserve currency and boosting alternative payments system and demand for safe havens.
Among these safe havens are gold, a precious metal seen as a safe haven for thousands of years, and the flagship cryptocurrency Bitcoin, which the CEO of the world’s largest asset manager BlackRock, Larry Fink, recently said he believes is “digitizing gold” and has potential to revolutionize the financial system.
Featured image via Unsplash.