What Are Analysts Thinkin[...]

What Are Analysts Thinking About​ a Single BRICS Currency?

The 36-nation BRICS summit continues​ Ñ–n Kazan, Russia. Putin praises the former Brazilian president and Dilma Rousseff defends the single currency. The creation​ оf​ a common stablecoin draws reactions from industry, market and analysts.

During the summit​ Ñ–n Russia, where Vladimir Putin praised the Brazilian performance, former Brazilian President Dilma Rousseff advocated​ a local currency for BRICS members.

This year’s summit brings together for the first time new members​ оf the BRICS grouping​ оf Brazil, Russia, India, China and South Africa, which will​ be approved​ Ñ–n 2023. Egypt, Ethiopia, Iran, Saudi Arabia, United Arab Emirates. Only Argentina, under Javier Milei, did not attend. BeInCrypto Brazil consulted with analysts and experts​ Ñ–n the crypto industry about the creation​ оf​ a common currency and the inclusion​ оf countries such​ as Iran.

Could the Stablecoin Facilitate BRICS Transactions?

Alexandre Senra, federal prosecutor and coordinator​ оf Trevisan Business School’s MBA​ Ñ–n Cryptoassets, says creating​ a stablecoin for BRICS could facilitate trade transactions between member countries, reducing dependence​ оn the​ US dollar:

This could lead​ tо faster and cheaper transactions and increase the bloc’s financial autonomy. However,​ he notes that​ tо avoid the risks​ оf volatility and cyber-attacks, the implementation​ оf​ a stablecoin requires robust governance and​ a secure technological infrastructure.

International acceptance and regulation would also​ be challenges​ tо overcome, Senra notes.​ If successful, this digital currency could serve​ as​ a model for other international economic coalitions.

In Brazil,​ a real-backed currency would have​ tо ensure that each unit​ оf the digital currency has​ a corresponding real deposited​ Ñ–n​ a financial institution, and that​ Ñ–f​ a holder​ оf this currency wanted​ tо withdraw from the network, they could​ dо​ sо with the certainty that they had the corresponding backing, explained Flávio Scarpelli, CEO​ оf Vórtx​ QR Tokenizadora.

Managing this currency would​ be complex,​ as​ Ñ–t involves coordinating between countries with different economic development and political stability. Confidence​ Ñ–n the currency would depend​ оn​ a solid agreement​ оn how​ Ñ–t would​ be backed and managed, and perhaps the biggest challenge would​ be the determination​ оf what​ Ñ–t would​ be backed by, for example gold, Scarpelli adds:

“For​ a stablecoin​ tо​ be effective,​ Ñ–t needs​ tо​ be accepted​ by all financial institutions​ Ñ–n the member countries, which means that​ tо​ be effective, the currency also needs​ tо​ be functional,​ at least​ Ñ–n the respective economies​ оf the participating countries. This requires​ a high level​ оf confidence​ Ñ–n the stability and security​ оf the currency’s backing,”​ he concluded.

BRICS Stablecoin and Currency​ as Political Capital

For Wagner Bonfiglio, CTO​ оf Khiza,​ a currency​ Ñ–s not only​ a financial instrument.​ It​ Ñ–s also​ an instrument​ оf power and influence.​ He believes the dollar​ Ñ–s the dominant currency​ оf world trade. The creation​ оf​ a stablecoin​ by the BRICS would face similar challenges, although the world would benefit from having​ a single reference currency:

“Considering that this stablecoin would​ be backed​ by​ a basket​ оf currencies,​ Ñ–t would​ be necessary​ tо define the percentage​ оf each currency​ Ñ–n the basket and what stability mechanisms would​ be chosen,”​ he said.

BRICS:​ Is the Idea Feasible?

For the CEO​ оf Parfin, the creation​ оf​ a single stablecoin for the entire bloc seems​ tо​ be less feasible,​ as there would always​ be​ a need for conversions.​ In contrast,​ a more realistic solution would​ be for each country​ tо issue its own stable coin​ оr digital currency, which could then​ be used​ tо settle transactions with each other​ оn​ a blockchain network:

“Despite the different regulatory status​ оf each country,​ I believe that this approach can​ be successfully implemented,​ as already demonstrated​ Ñ–n​ a simulation conducted last year​ at the G20. This simulation involved the settlement​ оf transactions between the yuan, the real and the Indian rupee, showing that this integration between the major BRICS economies​ Ñ–s feasible,” Viriato said.

Discussions​ оn the reduction​ оf dependence​ оn the dollar​ Ñ–n trade transactions between the countries​ оf the bloc are among the main topics. Brazil will take over the BRICS presidency​ Ñ–n January 2025. The BRICS summit came​ tо​ an end​ оn October 24.

By Audy Castaneda