How Would a New BRICS Currency Affect the US Dollar? (Updated 2024)

The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, are looking to establish a new reserve currency backed by a basket of their respective currencies.

All eyes were recently on the 2024 BRICS Summit that took place October 22 to 24 in Kazan, Russia. The BRICS nations were widely expected to continue their discussions of creating a potentially gold-backed currency, known as the “Unit,” as an alternative to the US dollar.

The 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 90 percent of all currency trading. Until recently, 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 ongoing situation is the US trade war with China, as well as US sanctions on China and Russia. Should the BRICS nations 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 United States and global economies.

During the first US Presidential Debate between former President Donald Trump and current Vice President Kamala Harris on September 10, Trump doubled down on his recent pledge to impose strict tariffs on nations seeking to move away from the US dollar as the global currency. He is taking a particularly strong stance against China, threatening to slap 60 percent to 100 percent tariffs on Chinese imports if elected, although these hefty tariffs would be paid by American companies and consumers purchasing Chinese products.

At this year’s BRICS summit, Russian President Vladimir Putin appeared on stage holding what appeared as a prototype of a possible BRICS banknote. However, he seemed to back away from previous aggressive calls for de-dollarization, stating the goal of the BRICS member nations is not to move away from the US dollar-dominated SWIFT platform, but rather to deter the “weaponization” of the US dollar by developing alternative systems for using local currencies in financial transactions between BRICS countries and with trading partners.

“We are not refusing, not fighting the dollar, but if they don’t let us work with it, what can we do? We then have to look for other alternatives, which is happening,” he stated.

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.