How Would a New BRICS Currency Affect the US Dollar?

The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, have had many discussions about establishing a new reserve currency backed by a basket of their respective currencies.

The creation of a potentially gold-backed currency, known as the “Unit,” as a US dollar alternative is also under consideration by BRICS members. However, whether or not these countries can fully separate themselves from the ruling global currency is up for debate even amongst themselves.

A potential BRICS currency would allow these nations to assert their economic independence while competing with the existing international financial system. The current system is dominated by the US dollar, which accounts for about 89 percent of all currency trading. Traditionally, nearly 100 percent of oil trading was conducted in US dollars; however, in 2023, one-fifth of oil trades were reportedly made using non-US dollar currencies.

Central to this situation is the US trade war with China, as well as US sanctions on China and Russia. Should the BRICS establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what’s known as de-dollarization. In turn, this would have implications for the US and global economies.

If BRICS watchers were hoping for more fireworks at the 2025 BRICS meeting held in Brazil this July, they were sorely disappointed. Putin and Chinese President Xi Jinping were not in attendance, and talk of a BRICS currency was much more muted. On top of this, according to Modern Diplomacy, that topic may be even less of a concern at next year’s BRICS meeting; it will be held in India, which has sought to distance itself from a move away from the US dollar.

It’s still too hard to predict if and when a BRICS currency will be released, but it’s a good time to look at the potential for a BRICS currency and its possible implications for investors.