- 1
The de-dollarization drive is growing traction. The nations don’t want to depend on one currency for international trade. - 2
BRICS countries have been vocal about challenging the US dollar’s hegemony. - 3
The announcement of gold-backed currency puts them one step ahead in their race to achieve economic self-dependence.
In what could be termed a groundbreaking move, the BRICS nations have announced a gold-backed currency. The step clearly shows the world’s growing propensity to wean off the dollar for international transactions. After World War 2, most powerful nations agreed on using USD for international transactions. As a result, it gave undisputed power to this currency and put the USA at the top of the global economy.
But the times are changing now and many countries are challenging the supremacy of the US dollar. They don’t want to face sanctions for any anti-America acts. They want to support their economy without depending on a single currency. Thus, going for an alternate currency could be the ultimate solution. But would it be as feasible as countries supporting the initiative think? Well, the whole world will have to witness that.
For now, one can notice the developments and speculate about the future. So, let’s delve into all the aspects and see how this endeavor is taking shape.
Why Gold-Backed Currency?
In the past, a few countries have used cryptocurrency to evade the dollar. However, the limited usage of digital assets doesn’t make it a ubiquitous medium. Gold, on the other hand, has a strong and well-established global dominance. It can be used to support the various nations’ bids to raise money for different purposes. However, countries that don’t have a scalable gold reserve might find themselves helpless. Currently, no one knows how the system will work to support those nations Since the idea is gaining traction, the BRICS nation may come up with some supportive conditions.
How are BRICS Nations Reacting to it?
Brazil and South Africa have been quite vociferous about a new currency. The leaders of both countries have stated several times that the world needs an alternative to the US dollar. Russia is already reeling under sanctions and has a very possible reason to support this initiative. China hasn’t made any affirmative statement about it, but it’s experimenting with its own CBDC right now.
India hasn’t stated anything clearly about its stance as of now since the US is its major trade partner and it doesn’t want things to go sour. Nevertheless, the country is making efforts for bolstering its own currency. External Affairs Minister, S Jaishankar said that there are no plans to launch a BRICS currency right now. Recently, the country made some efforts to publicize its Unified Payment Interface (UPI) service.
Recently Prime Minister Narendra Modi used it at Eiffel Tower on his France tour. Furthermore, the country plans to take it to the Gulf nations. So maybe not directly, but India is trying to lessen its dependency on the dollar.
Conclusion
The BRICS Summit 2023 is slated to happen from 22 to 24 August 2023 in South Africa. The countries have been trying to introduce an alternative to the US dollar for international trade. Many other countries have also started to support this initiative. However, one will have to wait and see how they achieve it.
Source: https://www.thecoinrepublic.com/2023/08/10/can-brics-gold-backed-currency-reshape-the-global-economics/