Lecture Notes: BRICS Currency Developments

Introduction

• Speculations have existed about BRICS launching a new currency to compete with the US Dollar.
• Official talks have occurred about a new payment system akin to Swift, but without concrete updates on a BRICS currency.
• Russia is keen on launching the currency by the end of its chairmanship this year.

Proposed Currency Options

• Cryptocurrency Pegged to the Chinese Yuan
• New Currency Pegged to Gold

BRICS Cryptocurrency and Stablecoin

• Russia's Leadership: As the current chairman, Russia is spearheading efforts to establish state-backed cryptocurrency exchanges and a BRICS stablecoin linked to the Chinese Yuan.
• Planned Exchanges:
  • Moscow and St Petersburg are the locations for two major cryptocurrency exchanges.
  • Moscow exchange is to be a separate entity under a legal framework.
  • St Petersburg exchange will use existing infrastructure.
• Stablecoin Development:
  • Focus on stablecoins linked to national currencies or a currency basket.
  • Aims to reduce dependency on the US Dollar.
• Economic Benefits:
  • Increased demand for national currencies of BRICS countries.
  • Strengthens economic cooperation among member nations.

China's Role

• Yuan as Global Currency:
  • Stablecoin pegged to the Chinese Yuan aligns with China's goals.
  • Offers stability and security in international trade transactions.

Gold-Backed Currency

• Speculations:
  • Potential for the stablecoin being backed by gold.
  • BRICS countries hold significant gold reserves.
  • Gold backing would provide stability and attract nations moving away from Dollar-based assets.

India's Position

• Regulatory Framework:
  • India is working on cryptocurrency regulations and seeking public input.
  • Recent reports suggest India used cryptocurrencies for oil transactions with the UAE.

Potential Impact of a BRICS Stablecoin

• International Trade:
  • A blockchain-based stablecoin would facilitate real-time settlements and reduce fraud.
  • Bypasses traditional banking systems, benefiting BRICS' diverse economic policies.
• Yuan Peg Advantage:
  • Reduces reliance on the US Dollar, minimizing exchange rate risks.
  • Stability in trade and financial systems.
• Increase of Yuan as a Reserve Currency:
  • Global demand for Yuan would rise, enhancing its value.
  • Positions China strategically in global finance.

Bypassing Sanctions

• Alternative Financial System:
  • Allows countries like Russia to circumvent US sanctions.
  • Maintains economic activity through non-dollar transactions.

Conclusion: Gold-Backed Currency Prospects

• Stability and Security:
  • Gold's inherent value offers a stable foundation for currency.
  • Aligns with Russia's interest due to sanctions faced by Western systems.
• Currency Launch:
  • BRICS aims for infrastructure establishment by 2024 to support a new currency system.

Discussion

• Debate continues on whether a gold-backed or blockchain-based stablecoin would be more beneficial.
• Stability of a gold-backed currency vs. the already developed infrastructure of a stablecoin.

Notes compiled from a lecture on the developments around a potential new BRICS currency and its implications for global finance.