Putin offers “BRICS token banknotes” as an alternative to the dollar during the BRICS summit

Key takeaways

• The BRICS countries want to get rid of the dominance of the US dollar. Vladimir Putin even presented his banknote at the recent BRICS summit in Kazan.
• Alternative currencies and digital payment systems are being developed to reduce reliance on SWIFT and the US dollar.
• Central banks such as the International Monetary Fund and the Bank for International Settlements are also exploring the possibility of creating digital currencies as potential alternatives to traditional reserve currencies.

The emergence of alternative currencies

The BRICS countries seek to shift away from the dominance of the US dollar in global finance. Some economists have long predicted this, believing that the current system is unsustainable.

For decades, the US dollar was the world’s leading reserve currency, ratified after the Bretton Woods Agreement in 1944. This status gave the Federal Reserve significant power, allowing it to conduct monetary policy with direct inflationary pressure lower than global demand for dollars. .

Challenges and alternatives

However, reliance on a single currency brings with it weaknesses. Losing the dollar’s reserve currency status could lead to a massive influx of capital into the US economy, leading to hyperinflation.

Aware of this potential danger, leaders such as Vladimir Putin have spoken publicly about exploring alternatives. At the recent BRICS summit hosted by Kazan, Russia, Putin presented a symbolic banknote to the BRICS group, indicating the increasing seriousness of their endeavors.

Developments and cooperation

Central to this transformation is the development of an alternative to the SWIFT payment system, currently dominated by the United States and Europe. SWIFT facilitates international financial transactions and its control has been used as a tool in geopolitical conflicts, such as when Russia was excluded from the system after its invasion of Ukraine.

Western analysts predicted serious economic consequences for Russia, but the country’s relations with BRICS countries such as China and India have strengthened, leading to increased trade and closer military cooperation.

The future of digital currencies

The BRICS countries are not the only ones exploring alternatives. Both the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) are developing digital currencies as a potential alternative to the dollar-centered system. The Bank for International Settlements is already testing central bank digital currencies in several countries through the “mBridge project,” with the aim of creating a cashless global economy within the next two years.