By Thuli Nkomonde – Director – Bitcoin in Soweto.
The recently concluded 2023 BRICS summit rekindled discussions around the pursuit of a unified BRICS currency. The collective strength of Brazil, Russia, India, China, and South Africa has often been viewed through an economic lens, with their shared ambitions pointing towards a decreased reliance on dominant global currencies, mainly the US dollar. The unified currency thinking centres on a broader narrative of global autonomy coupled with economic interdependence between participating nations.
Of course, should the decision ultimately be taken to adopt a single BRICS currency, the process of implementing it would be far from simple, or quick. For one, it would require a high level of cooperation and trust among the BRICS nations. And then there are the immense technical and logistical challenges to be addressed. A further challenge is the time it would take for a new currency to gain acceptance across BRICS populations and credibility within the global economy.
Interestingly, there is already a solution to most of these challenges, in the form of cryptocurrency, which already enjoys widespread and fast-growing global acceptance and credibility, and has no historical ties to any of the fiat currencies of the BRICS member nations, thereby addressing any perceptions of bias. More than that, crypto has a number of other compelling benefits to offer as a single, unified, BRICS currency.
The allure of crypto as a single currency option for the BRICS consortium goes far beyond its novel digital nature. At its core, crypto already offers decentralization, a feature that more than adequately addresses the conundrum of how to achieve economic diplomacy via a single currency. No single BRICS nation, with its inherent political and economic aspirations, would be able to dominate, or direct decisions regarding, a newly implemented BRICS digital currency. Instead, the participants would be able to have an equal say in a system that is untouched by individual national policies or potential power struggles, and will remain as such over time. The inherent nature of crypto thus ensures a level playing field, a paradigm where economic cooperation isn’t overshadowed by hegemonic intentions.
Then there’s the globally recognised value that cryptocurrencies carry, which would help to simplify trade and economic relationships between the BRICS nations. Given that BRICS constitutes five very diverse economies, the most likely stumbling block to the success of a shared currency would be how best to figure out exchange rates and conversion costs. Cryptocurrencies offer a simple and elegant solution to these issues, presenting an opportunity not only for a relatively seamless transition, but also for seamless ongoing transactions between countries.
Trust and transparency are two more reasons why BRICS nations should not overlook crypto as a potential solution to their single currency ambitions. Every transaction using crypto, and every shift in the overall value of the currency, is recorded on immutable ledgers. There is, quite simply, no opportunity for anyone to ‘cook the books’ when crypto is the shared currency. When you pair this transparency with the sheer strength of the security that underpins cryptocurrencies, the result would be a fiscal system that is significantly less susceptible to fraud, counterfeiting, and any of the other malevolent activities that plague traditional currencies in most countries.
As if all these benefits weren’t reason enough for the BRICS members to seriously consider crypto for their shared currency, there is another one that is perhaps even more compelling than all the rest, namely the potential for a crypto-based shared currency to finally address the ongoing challenge of financial inclusion with which all the BRICS countries still grapple. Many of these nations have large segments of their populations that still don’t have access to the benefits of traditional banking systems.
Cryptocurrencies, with their digital wallets and peer-to-peer transactional capabilities, offer a viable solution by which to make these people and communities part of the larger economic narratives of their respective countries, without the need for extensive investment into additional banking infrastructure.
Of course, the journey towards a crypto-based single BRICS currency wouldn’t be devoid of challenges. Most cryptocurrencies have historically demonstrated notable price volatility, which could raise fears of them introducing economic instability to the BRICS nations. And while the decentralized nature of crypto is an advantage, it also means that central banks would need to relinquish some, or all, of the control that they typically have over monetary policy. Lastly, convincing the populations and governments of these diverse countries to adopt a digital currency may be a significant challenge, particularly given their cultural, economic and political differences.
While these challenges are real, and should not be underestimated, they are not insurmountable. A well-structured digital currency, designed with the unique needs of the BRICS nations in mind, could address many of the concerns. For example, the digital currency could be structured to be stable and less volatile than those currently available on the open market. The central banks of the BRICS nations could participate in the design and implementation of appropriate regulations and controls working alongside trusted crypto exchange companies such as Binance, which is the largest crypto exchange by trade volume. And a well-thought-out public relations, awareness and education campaign would go a long way towards securing the necessary cultural and political acceptance.
Ultimately, the potential advantages of crypto as a single BRICS currency far outweigh any perceived challenges or disadvantages. With thoughtful design and careful implementation, such a single digital currency could easily become a reality, bringing with it significant benefits to the BRICS member nations and their populations.