Introduction
The dollar has long reigned supreme as the world’s dominant reserve currency, strengthening global trade, finance, and geopolitical influence. However, the rise of BRICS, a powerful consortium of emerging economies, and their proposal for a new joint currency could challenge the dollar’s supremacy. On the other hand, creating a BRICS currency has the potential to dent the dollar’s dominance, momentous structural, political, and practical hurdles remain. Henceforth, the future of global finance may witness a slow rebalancing rather than an abrupt dethronement of the dollar.
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A Cursory Glance at the Rising Importance of theDollar
Since the end of World War II, the U.S. dollar has enjoyed unparalleled status as the world’s primary reserve currency. Currently, nearly 60% of global foreign exchange reserves and over 80% of international transactions are conducted in dollars. Undoubtedly, this dominance gives the United States extraordinary financial and political power, including the ability to impose sanctions, influence global liquidity, and finance its deficits cheaply.
Subsequently, the BRICS group- Brazil, Russia, India, China, and South Africa, recently expanded to include Saudi Arabia, Iran, Egypt, Ethiopia, Argentina, and the UAE- represents a formidable coalition seeking a more multipolar world. Moreover, discussions about launching a BRICS currency or establishing alternative payment systems aim to reduce dependency on the dollar, promote regional integration, and shield themselves from Western financial pressure.
However, introducing a currency that can meaningfully compete with the dollar is a complex endeavor involving not only economic strength but also trust, stability, liquidity, and a well-established financial architecture. Therefore, while the idea is bold and strategically significant, its realization will require overcoming monumental challenges.
Supporting Arguments
1. BRICS’ Economic Weight Strengthens the Prospect
- Global Share
Firstly, the BRICS nations, especially after expansion, account for approximately 40% of the world’s population and about 36% of global GDP (based on purchasing power parity). This greater participations not only strengthen the BRICS power but also makes the power of BRICS the entire world.
- Energy and Resources
Secondly, BRICS nations hold substantial energy reserves, covering vital resources. Such as Russia and Brazil are among the world's largest oil and gas producers, while China and India are major consumers and investors in renewable energy. Conclusively, the abundance of resources not only strengthens BRICS' economic influence but also enhances their strategic leverage in global energy governance.
- Trade Networks
In addition to their economic strength, BRICS nations play a vital role in global trade. Together, they represent a significant share of international exports and imports, especially in critical sectors such as oil, machinery, pharmaceuticals, and agricultural goods. Trade between BRICS members not only boosts their economic influence but also allows BRICS to shape global trade norms and policies. Hence, their collective economic size and resource control provide a strong foundation for challenging the dollar-centric system, at least in specific sectors like energy trading.
2. Political Motivation to Challenge Dollar Dominance
- Weaponization of Finance
To begin with, BRICS countries collectively oppose the increasing weaponization of finance by Western powers. For instance, unilateral sanctions imposed through dollar-centric mechanisms have prompted BRICS members to advocate for alternative systems that promote financial sovereignty. Consequently, BRICS is working toward reducing reliance on the U.S. dollar by enhancing bilateral trade in local currencies and developing independent financial infrastructure such as CIPS and the New Development Bank. Thus, the strategic shift reflects a broader aim to challenge the politicization of economic tools and promote a more multipolar and equitable international financial order.
- Sovereignty and Autonomy
Besides, BRICS plays a pivotal role in promoting global sovereignty and economic autonomy, particularly among developing nations. By challenging the dominance of Western-led financial and political institutions, BRICS empowers its members to pursue independent policy agendas free from external coercion. The bloc's efforts to de-dollarize trade, establish alternative financial systems, and advocate for multipolarity reflect a broader desire to reduce dependency on Western powers. Consequently, BRICS serves as a platform for its members to assert national sovereignty, protect economic interests, and redefine global governance on more equitable terms.
- Global South Leadership
Furthermore, BRICS has increasingly positioned itself as a representative of the Global South, advocating for the interests of developing nations that are often marginalised in Western-dominated global institutions. By promoting reforms in the IMF, WB, and UNSC, BRICS challenges the disproportionate influence of advanced economies and calls for a more equitable international order. In addition, through initiatives such as the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), BRICS offers financial alternatives tailored to the needs of emerging economies, free from the stringent conditions often attached to Western loans. Indeed, this shift empowers countries in Africa, Asia, and Latin America to pursue development paths that reflect their own priorities rather than conforming to externally imposed models. Thus, there is a strong political will among BRICS members to develop alternatives that can erode the dollar’s hegemonic power.
3. Challenges of Internal Divergences Within BRICS
- Economic Diversity
The BRICS countries- Brazil, Russia, India, China, and South Africa- have vastly different economic structures, growth patterns, and policy priorities. For example, China has a manufacturing-based, export-driven economy. India relies heavily on services and agriculture. Russia and South Africa are resource-dependent, with economies tied to commodities like oil, gas, and minerals. Brazil has a mixed economy with significant reliance on agriculture and natural resources. This economic diversity makes it extremely difficult to create a single currency that would meet all their monetary needs. As a result, reaching aconsensus on monetary policy and currency valuation becomes complex.
- Geopolitical Tensions
Over and above, despite being part of the same bloc, the BRICS nations are not always politically aligned. For instance, India and China have recurring border tensions while Brazil and Russia often have different global alignments. Respectively, South Africa and India both seek leadership roles in Africa and Asia, which can lead to competition within the group. Undoubtedly, these geopolitical tensions reduce trust and limit deep cooperation. Therefore, absence of strong political unity, it is unlikely that countries would be willing to share control over monetary policy or central banking authority.
- Currency Stability Issues
Another major obstacle to a BRICS currency is the lack of consistent currency stability among its members: China’s Yuan is relatively stable and has some international recognition, partly due to state control and strong reserves. Russia’s ruble, Brazil’s real, and South Africa’s rand are often subject to high volatility due to economic sanctions, political uncertainty, or commodity price fluctuations. India’s rupee is more stable than most but still faces pressure from inflation, trade deficits, and capital outflows. Consequently, without strong internal coherence and trust, the idea of a unified, credible BRICS currency remains aspirational.
4. Structural and Technical Barriers
- Financial Infrastructure
To kick off, the U.S. dollar's global dominance is not just because of the size of the American economy, but also due to the vast and deeply integrated financial infrastructure supporting it. First, the SWIFT system, enabling global bank-to-bank transactions, primarily operates in dollars. Unquestionably, the U.S. Treasury bond market is the largest and most liquid in the world, making it a preferred safe-haven asset for central banks and investors. Second, the Federal Reserve, with its transparent monetary policy and global credibility, further reinforces the system. Conversely, BRICS lacks a comparable, unified financial system. So, until such infrastructure is built and accepted globally, BRICS cannot realistically challenge the dollar's dominance.
- Reserve Currency Requirements
In addition to functioning as a global reserve currency, a currency must meet several strict conditions, such as widespread international acceptance in global trade and finance, full convertibility, exchange rate stability, and deep capital markets. Sadly, no BRICS nation’s currency fully meets these standards so far. The Chinese Yuan, for example, is not fully convertible, and Russia’s Ruble is often subject to sanctions. In short, without meeting these criteria, no BRICS currency can replace or even meaningfully compete with the dollar on a global scale.
- Trust and Convertibility
Besides, the U.S. dollar is trusted worldwide because of the rule-of-law-based financial and political system in the United States. Investors and governments know that independent courts protect their assets. Contrarily, BRICS countries often face concerns about transparency, governance, and capital controls. For instance, China imposes capital controls and has opaque governance structures, Russia faces sanctions and political instability, and other BRICS members also have histories of inflation, currency controls, or political interference. Therefore, technical and structural gaps pose serious obstacles to the immediate success of any BRICS currency project.
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Critical Analysis
The ambition of BRICS to launch a new currency reflects a deep dissatisfaction with the current global financial order. However, economic muscle alone cannot create a trusted reserve currency. It requires credibility, political unity, market size, and financial stability, qualities that BRICS as a bloc still struggles to achieve collectively. While a BRICS currency could weaken the dollar’s grip in specific sectors and regions, fully replacing the dollar is, for now, a distant possibility rather than an imminent reality.
Conclusion
The BRICS move to establish a common currency could certainly dent the dollar’s global dominance over the long term, particularly in energy trading and among developing countries seeking financial alternatives. Yet, monumental challenges stand in the way of immediate success. Therefore, rather than witnessing the rapid collapse of the dollar’s supremacy, the world is more likely to experience a gradual evolution toward a more diversified, multipolar currency system. In this emerging world order, the dollar will likely remain powerful, but no longer unchallenged.
