A New Payment System to Cut Dependence on the USD

• The development of BRICS Pay is part of broader de-dollarization efforts, with Russia and China leading initiatives to create financial independence from the U.S. dollar.
• As BRICS expands to include nations like Saudi Arabia, Egypt, and the UAE, BRICS Pay could play a key role in international projects.

The BRICS alliance has unveiled the demo of its long-awaited payment platform, BRICS Pay. This revelation comes as the group heads toward its post-expansion summit scheduled in Kazan, Russia, from October 22 to October 24. Russia, currently chairing BRICS, has been advocating for alternatives to Western-dominated financial structures, which led to the development of BRICS Pay.

Significance of BRICS Pay Amid De-dollarization Efforts

Anton Siluanov, Russia’s Finance Minister, recently emphasized the need for an alternative to the International Monetary Fund (IMF). He criticized the institution for being influenced by American political interests. With BRICS now representing 37% of the global economy, this new payment system aims to reduce reliance on the U.S. dollar, reported CNF.

According to the BRICS official website, BRICS Pay is being positioned as a foundational system for countries seeking financial independence. Moreover, Chinese officials highlighted its potential to facilitate transactions between member nations. This will indeed enhance trade and economic relations while reducing reliance on USD, reported CNF.

Also, this decentralized platform will serve as an alternative to the SWIFT network, which is predominant in European countries. For further context, BRICS has been working on the concept of a unified payment system since 2019.

For this, the BRICS Payments Task Force was established in 2020. The body was formed to create a platform that can accommodate the unique financial needs of its member countries.

At the BRICS Business Forum, held at Moscow’s International Trade Center, the platform’s capabilities came to light. It also provided participants with a preview of the retail technologies behind BRICS Pay. The system aims to support a wide range of transactions, including remittances and retail payments.

The development comes at a time when several countries sanctioned by the U.S. are undertaking de-dollarization efforts. This system aims to address this by offering nations a new method of conducting transactions.

Other Areas of Use

The payment system may also play a crucial role in international initiatives such as China’s Belt and Road Initiative (BRI). BRICS Pay could become an essential tool for settling trade and investment transactions as the bloc expands its global reach.

The launch of BRICS Pay follows the bloc’s recent expansion, which now includes Saudi Arabia, Egypt, the UAE, Iran, and Ethiopia. Both Russian President Vladimir Putin and Chinese President Xi Jinping have been leading efforts to reduce global dependence on USD.

While BRICS Pay is gaining traction, the U.S. dollar remains a dominant force in global finance. As of now, it continues to maintain its position as the world’s leading reserve currency despite geopolitical tensions. Certain reports also suggest that the Asian bloc moving away from the USD could boost the use of XRP. 

The U.S. economy accounts for approximately 26% of global GDP and is quite resilient with robust liquidity of U.S. capital markets. Central banks continue to hold significant amounts of U.S. dollars with roughly 60% of global reserves stored in USD. Whilst, 64% of global debt securities are denominated in dollars.

However, with the uncertainty around the upcoming U.S. presidential elections, analysts foresee increased market volatility. This uncertainty could prompt more nations to seek alternatives to the dollar with the BRICS Pay taking the top spot.