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Russia hosted the BRICS summit at Kazan, welcoming participants from 36 nations to hold talks on several key issues. One issue that has made it to the headline is a pitch to de-dollarize the current financial mechanism for a seamless and efficient exchange of services plus trades. De-dollarization essentially refers to ditching the greenback and adopting local currencies. The pitch has further gained the attention of crypto enthusiasts who are more than willing to hold their interest in this development.
For starters, Putin found a need to pitch for de-dollarization due to the ongoing limitations being faced by his nation after the US slapped them with sanctions. Businesses were unable to receive payments from their customers. Thereby, affecting their operations within Russia.
A way to navigate around that is to let it slide by having an alternative in place that does not require the US Dollar at all. For reference, most of the members of BRICS already have agreements in place wherein they bilateral trade using their respective fiat currencies. That has no requirement of the US Dollar at all. The recent pitch looks to bring a common method for every member altogether.
This has opened a portal for cryptocurrencies to jump in. Digital tokens work on the principle of peer-to-peer transfer which does not require intermediaries. Users only have to fund their wallet, acquire a crypto of their preference, and they are then good to proceed with transfers.
Participants of BRICS have suggested their models for adoption and chances are that crypto enthusiasts may take a backend route. This would help them productively come across every BRICS member. As for suggestions, India has sought a larger adoption of its UPI system which is already in place across 7 nations. More than 30 countries have expressed their interest in adopting India’s UPI as a payment system.
Challenges that it faces, or any other upcoming payment model would face, are that of currency devaluation and building a common consensus.
Cryptocurrencies are largely decentralized, backed by blockchain, to meet every requirement. It would be a matter of regulation and adoption to boost its chances here. If it does make its way to BRICS as an alternative to the US Dollar, then it would be a huge win for digital tokens.
As the BRICS Summit Kicks Off, Top Lawmakes Are Pushing the Idea that Russian Miners Could Sell Their #Bitcoin to International Buyers, Who Would Use BTC and Other Crypto to Pay for Imports, Effectively Bypassing Western Sanctions.
— matthew sigel, recovering CFA (@matthew_sigel) October 23, 2024
Challenges in terms of cryptocurrencies that members of BRICS will have to take into account are volatility, fluctuating sentiments, and still a reliance on the US Dollar. One cannot ignore the fact that cryptocurrencies surged only when the Federal Reserve cut rates by 50 bps. Digital tokens continue to be affected by the upcoming US Presidential elections. Adoption of crypto would require a thorough integration of their fiat currencies so that the US Dollar rarely comes into the picture.
Putin’s pitch for de-dollarization is based on the experience where the West has weaponized its currency to cut off a country from international trade. It believes that the same can be done at any time with other countries and hence, there is a need to consider an alternative payment system at least among BRICS members.
Also Read: BRICS Alliance Embraces Cryptocurrencies for Investment
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