Members of countries that form the group called BRICS (which includes Brazil, Russia, India, China, South Africa, and six others) have floated the idea of creating a shared currency. While no such currency exists yet, recent summits have brought the concept into the spotlight.
The idea raises important questions: Could it reduce the U.S. dollar’s dominance? What would it mean for trade, finance, and geopolitics? For now, the BRICS currency is more speculation than a shift, leaving the U.S. dollar firmly in place as the world’s financial anchor.
Keep reading: We’ll look at what’s being proposed, why it matters, and the potential implications for the global economy.
Table of Contents
What is a BRICS currency?
A BRICS currency is a speculative idea of a shared money system that member nations could use for trade and financial transactions instead of the U.S. dollar. BRICS is a group of 11 countries, named after its five original members: Brazil, Russia, India, China, and South Africa.
Some goals of using non-dollar currencies within BRICS include reducing reliance on the dollar, simplifying cross-border trade, and gaining more independence from Western sanctions. Supporters also view this as a way to increase the group’s global economic influence.
No such currency has been created yet, and BRICS members have said that no formal talks are underway. Even so, speculation continues about the idea of a shared BRICS currency.
We’ve seen an increased push to use local currencies for trade and investment among BRICS countries, and debate about a possible global currency reset continues. Still, even BRICS leaders acknowledge that major global currencies are often easier and less costly to use.
Can BRICS challenge the U.S. dollar?
The U.S. dollar remains dominant thanks in part to its liquidity, widespread trust, and deep support from U.S. financial institutions. It is still the primary global reserve currency and is used in most international trade and debt settlements.
BRICS faces formidable obstacles in challenging this dominance, many of which relate to the four functions of money:
- Medium of exchange: The dollar is accepted almost everywhere and has long served as a major medium of exchange. By contrast, BRICS currencies are not universally trusted or easily used across borders.
- Standard of deferred payment: Global debt is overwhelmingly denominated in dollars. BRICS lacks a common framework for managing long-term debt contracts and settlements.
- Store of value: The dollar’s role as the largest global reserve currency rests on the scale and stability of the U.S. economy. The diverse and sometimes volatile economic climates of BRICS members could limit global confidence in a shared alternative.
- Unit of account: The U.S. dollar provides a consistent standard for valuing transactions worldwide, supported by well-developed financial markets. BRICS countries could face challenges developing a currency with comparable reliability as a unit of account.
History also shows how difficult such a project would be. The euro was only possible after decades of negotiations, economic convergence, and the creation of shared institutions such as the European Central Bank. Even with this foundation, the euro has needed to overcome continued challenges.
For BRICS, the path would likely be even harder. Unlike the European Union, BRICS members do not all share a common market, comparable levels of economic development, or strong mechanisms for political coordination.
Without these foundations, establishing a shared BRICS currency and convincing the world to adopt it would be quite difficult in the near term.
What would a BRICS currency mean for the dollar?
If BRICS were to create a shared currency, it could encourage more trade settlements in non-dollar terms. Over time, central banks might also diversify global reserves more broadly, especially into BRICS currencies or other alternatives. Still, such a shift is unlikely to happen quickly.
The U.S. dollar currently represents nearly 58% of allocated global foreign exchange reserves, according to recent IMF data. No single alternative has offered the liquidity, trust, and stability needed to replace it.
If developed, a BRICS currency would likely become one component of the overall global reserve system, rather than a full replacement for the dollar.
This is why a sudden U.S. dollar collapse is unlikely. While the global system may slowly diversify, the dollar’s central role in trade, investment, and reserves remains secure in the near term.
Could a BRICS currency be backed by gold?
One idea occasionally raised is that a BRICS currency could be tied to gold reserves. One benefit of such a system would be greater stability, since gold has historically served as a store of value.
In practice, however, a gold-backed currency would face serious hurdles. It would require strict convertibility, large reserves, and a system for international settlements. Such systems have proven historically difficult to maintain, with the U.S. abandoning the gold standard in 1971.
While some BRICS members have increased their gold holdings, building reserves is not the same as creating a gold-backed financial system. Given historical challenges, monetary policy under a gold standard is likely an impractical foundation for a modern reserve currency.
Gold, however, continues to serve as a reliable store of value and can help diversify a portfolio. Even individual investors sometimes use gold to help diversify their portfolios in investment vehicles like IRAs, working with companies like American Hartford Gold and other reputable providers.
Why the BRICS currency debate matters
The BRICS currency debate matters because it reflects broader geopolitical shifts and growing frustration with U.S. dollar dominance. While the proposal itself is unlikely to materialize soon, it signals a push by emerging economies to gain more influence in global trade and finance.
Debates like this demonstrate how global alliances, trade patterns, and reserve strategies may gradually evolve, even if the dollar’s central role remains secure for now.
A shared BRICS currency remains more theory than reality, and it faces major structural, political, and economic hurdles. While the idea reflects a desire among emerging economies to lessen reliance on the U.S. dollar, it’s unlikely to threaten the dollar’s dominance in the near future.
The more realistic outcome is gradual diversification of global reserves and trade settlements, with the dollar continuing to serve as the cornerstone of international finance for years to come.