BRICS member countries plan to launch a common currency for their organization in the near future. For the moment, there is nothing to specify the support for the planned currency. Among analysts, the question of whether crypto or gold could be the support is debated. And the question is not easy to decide. Because certain data shows that crypto has advantages to put forward, to be chosen as support for the BRICS currency. The same goes for the precious metal gold. In this analysis, we will try to shed light on what is being said on this subject.
Crypto or gold: A not-so-obvious choice for BRICS
We know that the BRICS want to introduce a common currency to the group of countries. Recently, a Russian official indicated that this prospect is on track to materialize in the near future.
What we do not yet know is the form, or support that will be prioritized to support the currency envisaged by the BRICS. But two solutions seem to emerge as the most likely options. These include gold on one side, and crypto on the other. Which of the two would be chosen?
BRICS currency backed by gold, a good bad idea?
Experts have attempted to highlight the benefits of gold over crypto under the BRICS monetary project. According to their opinion, opting for a currency backed by gold would be synonymous with stability and reliability linked to the universally recognized value attached to the precious metal. The approach eliminates the need for a unified tax policy or bond market among BRICS nations.
But, there is a catch. The option in favor of gold to support the BRICS currency is not so easy to implement. This possibility appears to encounter considerable difficulties. Challenges which lead some to say that basically, the issuance by the BRICS of a currency supported by gold is an unrealizable project.
The reason is that the dominance of the US dollar in international transactions, central bank reserves and commodity trading remains unmatched. This, despite tensions between the United States and certain BRICS countries.
It should be noted that the economic influence of the BRICS is still overshadowed by their limited contribution to global production and trade. Therefore, some analysts believe that the idea of this new currency suddenly becomes less relevant. Additionally, logistical difficulties in managing gold reserves, fundamental differences between BRICS countries and the need for a single central bank pose major obstacles.
Additionally, historical facts, including the failure of the Bretton Woods system and the drawbacks of the gold standard, highlight the instability associated with gold-backed currencies. Indeed, studies show that the impact of the gold standard on inflation, economic growth and financial stability reveals greater volatility than after the Bretton Woods era.
Furthermore, a gold-backed currency would also limit a central bank’s ability to act as a lender of last resort. This weakness could lead to bank runs. Not to mention that the limited supply of gold, slow mining rates and resulting deflationary pressures would further compromise the viability of such a monetary option. In essence, a gold-backed BRICS currency is seen as futile, leading to increased volatility and instability in various economic aspects. But the appeal of a crypto-backed currency cannot be ignored.
Crypto, a potentially relevant support for the BRICS currency?
In the context of the considerable complexities associated with the deployment of a BRICS currency, crypto seems to present itself as a pragmatic solution. For good reason, it meets criteria of trust, transparency and economic diversity.
For analysts, its decentralized nature is an asset that guarantees a level playing field preventing the domination of a single nation as is the case of the United States today.
Furthermore, its global recognition simplifies trade between the various BRICS economies. This has the advantage of avoiding the complexities linked to exchange rates. Not to mention that the blockchain technology on which this crypto is based strengthens trust and transparency, mitigating the fraud that is prevalent in the traditional monetary ecosystem.
Furthermore, opting for crypto would be a unique opportunity to address the challenge of financial inclusion in BRICS countries. Digital wallets and peer-to-peer transactions could integrate underserved populations into an economic landscape without extensive banking infrastructure.
However, there are obstacles to the issuance of a BRICS currency based on crypto. These include price volatility and the need for central banks to cede some control. Despite this, experts tend to believe that a well-structured digital currency, designed in collaboration with trusted crypto exchanges, could alleviate these concerns.
Ultimately, the benefits of a crypto-based BRICS currency, including economic efficiency, transparency and financial inclusion, outweigh the challenges. Thoughtful design and strategic implementation could make this vision a reality, bringing substantial benefits to BRICS and their populations.
A revolutionary choice, all in all!
As can be seen, each asset offers unique benefits. Assets that the future BRICS currency should exploit if it wants to be relevant and competitive against the American currency, the dollar.
For some analysts, the shift in favor of gold or crypto as support for the BRICS currency matters little. Because, whether they opt for one or the other, the path chosen will in any case mark a decisive turning point in the history of the global economy.
Indeed, the introduction of a BRICS currency represents a bold step towards dedollarization. It fundamentally calls into question the domination of the American dollar in the global financial ecosystem. Especially since this decision has the potential to reshape the dynamics of international trade and monetary markets. Which would pave the way for a new era of financial cooperation between emerging economic powers.
As 2024 approaches, BRICS countries appear to be at a crossroads. They face a crucial decision that will undoubtedly make waves within the international financial community.
Conclusion
Ultimately, the choice between crypto and gold as support for the future BRICS currency remains delicate. Although gold offers stability and reliability, logistical challenges and the dominance of the dollar pose major obstacles. On the other hand, crypto has advantages such as decentralization, transparency, and promotes financial inclusion despite a risk of price volatility. Thoughtful deployment and collaboration with relevant crypto exchanges could alleviate these concerns. Whatever the choice, the introduction of a BRICS currency marks a decisive turning point towards dedollarizationwhich potentially reshapes global trade and monetary dynamics.
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