Doing away with US dollar? BRICS nations developing common payment system, says Russia

On the sidelines of BRICS summit, underway in Brasilia, Russian official said that the 5 major emerging economies are developing a joint new payment system

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Since 2014, when international sanctions were imposed on Russia for its annexation of Crimean peninsula, the country has brought down its trade in US dollar from 90% in 2014 to 50% in 2019. Consequently, payments in Russian currency ruble have increased from a mere 3%, when the sanctions were imposed to 13% in 2019.

On the sidelines of the BRICS summit, underway in Brasilia, Kirill Dmitriev, CEO of Russian Direct Investment Fund (RDIF) told reporters that the BRICS nations are developing a joint new payment system. Using the new payment system, the BRICS countries -- Brazil, Russia, India, China and South Africa -- the five major and emerging economies, would trade in their national currencies, Reuters reported. This is the 11th edition of the summit, since the group's establishment in 2006.

"An efficient BRICS payment system can encourage payments in national currencies and ensure sustainable payments and investments among our countries, which make up over 20 percent of the global inflow of foreign direct investment," Dmitriev said. He explained that developing the national segments of payment systems and their sustainable integration are the "key drivers of the economic partnership among the BRICS countries, given the increasing non-market risks of the global payment infrastructure."

Development of a common BRICS cryptocurrency for mutual payments was also discussed, but further details are currently unavailable. This is not the first instance when countries have opted against the use of the US currency in international trade. Since US dollar constitutes 61% of the forex reserves throughout the world, it makes the US dollar a de facto global currency, though it doesn't officially hold the title.

Due to dollar's hegemony over all the other currencies, it empowers the US to impose economic sanctions on nations, which it perceives as hostile. Presently, varying degrees of sanctions are functional on a number countries such as Russia, Iran, Venezuela, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, and North Korea.