Yesterday, Russian news agency RBC reported that the BRICS Business Council supported a unified payment system for member countries. The system, suggested by the Russian Direct Investment Fund (RDIF), could facilitate settlements through a single BRICS “cryptocurrency”.
BRICS (Brazil, Russia, India, China, and South Africa) putting forward their own multinational digital currency is not a new idea. It arose around September 2017 and continues to appear every now and then. BRICS pay, a mobile payment app for member nations, was announced in March. But a digital currency or settlement system has yet to come to fruition.
However, yesterday, RDIF Director General Kirill Dmitriev said that BRICS board members supported the creation of a new payment system to “ensure the stability of settlements and investments between our countries”.
At the annual summit held this week, he said they also discussed a multinational digital currency, referred to by RBC as a “cryptocurrency”, which would operate through the proposed payment system.
Dmitriev noted that the currency “will not be money, we can say that it will be a paperless document flow to facilitate transactions.” Though blockchain is not mentioned, it could have a role here as a paperless, immutable ledger. Indeed, BRICS agreed to explore blockchain for finance last year.
An alternative to SWIFT – and the dollar?
On the same day, Indian outlet The Economic Times reported that BRICS could further have discussed an alternative to SWIFT. It suggests that Russia, India, and China are planning to link the national payment messaging systems CIPS of China and SPFS of Russia. Both this and the RDIF settlement system hope to challenge the supremacy of the US dollar, as Reuters also claims.
Which may explain the less enthusiastic BRICS statement released in China. China’s upcoming central bank digital currency (CBDC) has been worked on for five years, before the BRICS idea was around. China would likely prefer rivalling the dollar with its renminbi than a combined, multinational system of currencies.
“We acknowledge the importance of the BRICS Survey on International Payments System,” yesterday’s post-summit statement read, according to Chinese state outlet Xinhua.
It also stated (emphasis by Ledger Insights): “We note the progress achieved in establishing a BRICS Local Currency Bond Fund [and] support the on-going collaboration to develop our local bond markets. We will continue to communicate on other possible areas of currency cooperation, consistent with each central bank’s mandate.”
While the RDIF is optimistic that a dollar challenging, digital currency supporting system is now on the cards, BRICS is less so. This may be because, of all member nations, Russia has been hit hardest by Western sanctions imposed via SWIFT, and in September switched to an SPFS and Iranian SEPAM-based system. The nation hence wants to generally move away from using the dollar, as the RDIF system could enable – but China’s somewhat conflicting plan is to do this with the renminbi alone.