At Cooingeek we follow near the Brics -Alliance movements. In recent years, we have covered how countries within BRICS have developed and launched digital currencies, promised to defeat to counteract the US geopolitical hegemony and even suggest creating its own gold -supported digital currency.
On one Later sections By Coingeek Weekly Livestream asked Kurt Wuckert Jr. Me about brics represents a threat to the dominance of USD. I answered no but explained that the question is nuanced. In this article I will expand the first answer and unpack if BRICS can create a meaningful challenge for the Almighty American dollar.
Understand Brics
To understand the answer to our central question, you must first understand what Brics are and its goals.
Brics is an abbreviation for Brazil, Russia, India, China and South Africa. It has since been expanded to include Egypt, Ethiopia, Iran, Indonesia and the United Arab Emirates. There are also partner countries that are not full members, such as Belarus and Cuba.
Brics is not a political union like the European Union. It does not share a currency, has no common ideology and is not even a free trade zone. There are as a collection of countries with some common interests but many differences.
In the last few years Brics have become higher in terms of devalization. It has even suggested a uniform digital currency as part of the efforts to create alternatives to USD and Western payment systems such as Swift. These calls grew much higher after 300 billion Russian assets arrested in response to its invasion of Ukraine.
While brics did not start the digital currency At his summit in 2024, with Russian President Vladimir Putin who called it “premature”, promised some members to speed up de-dollarization, namely Russia and Iran.
Essentially Brics is an alliance of nations in the global south with a common interest in shopping together and creating alternatives to payment And banking systems created by and largely exist to serve the United States and the Western world in general.
Understand USD
You may think you understand USD, but you probably don’t take its large size. The US Dollar is not just National currency in the United States; It is the world’s reserve currency and the lubricant that makes the global trading system work.
Here are some astonishing facts about USD:
- About 60% of all central bank reserves are held in it.
- It is involved in 90% of currency transactions.
- Most global goods are priced in US dollars.
- About half of all debts outside the United States are denominated in it.
While USD has lost some status as a reserve currency (down from 80% in the 90s), it is still dominant. The fact that about half of all global debts are denominated in it means that it is an incomprehensible part of the global financial system and will be for some time to come. Countries owe the World Bank in USD and companies in Japan, India and Brazil are guilty debts in USD. And they are not even guilty that debt to America or American companies – USD is often used to denote the debt between them!
It has never been a reserve currency so ubiquitous, so all -inclusive and so global. In addition, the United States is still the safest place for other countries to save their surplus, and they do so by recycling them back to US debt (Treasury and corporate bonds), shares and other assets. As an open financial system, investors know that they can buy, sell and move in and out of US markets easily; They are fluid, there are no capital controls and they are the most transparent and reliable markets.
This does not mean that USD is harmless or inaccessible, but that means a competitor would have a heck of a climb in front of it.
USD can become even more dominant in the coming years
While USD is already the strongest reserve currency in a long way, it can become even stronger in the coming years. Although there is currently plenty of uncertainty about the direction the US is on the way, the truth is still no better options for investors to knit their cash. In essence, this is the least bad alternative.
Adding momentum is President Donald Trump’s promise to make USD stronger than ever and his trade secretary, Howard Lutnick’s promise to do it through Stablecoins. US is currently passing to pass Extensive StableCoin regulationsAnd Lutnick has made it clear that they will play a role in strengthening USD dominance.
Unlike the EU, which has chosen one Digital euro central bank digital currency (CBDC), Trump has banned the creation of a in the United States and has run for private Stablecoins instead. Their spread across blockchain networks means that anyone, anywhere, from Argentina to Kenya to the Philippines, will be able to buy USD-supported StableCecoins on their favorite exchanges. This demand is likely to strengthen the dollar if consecutive US governments can handle inflation well.
In particular, Lutnick has a motive to see such an attitude succeed; his company, Cantor Fitzgerald (Nasdaq: CFIKX), has a 5% share in Tether. As a large holder of US Treasury, Tether’s growth would benefit him personally when he drives the demand for US debt, potentially lowers interest rates and benefits the US economy.
That said, if USD Stablecoins are to become globally dominant, they must work on a blockchain that peels and has incredibly low fees. Ethereum will not decrease it as most of the world cannot afford the average Ethereum gas fee, and BTC planner has killed all the functionality that would enable tokenized dollars to live on it. Scalable tool blockchains like BSV offer a potential solution.
So can brics replace USD?
Not quite, but potentially in Brics himself. USD is too deeply rooted in everything, to the extent that people even think in dollars when they carry out international trade. Given the debt issued in IT and the incentives for holders to get paid, and given the lack of major alternatives, USD will probably remain dominant for decades to come.
That said, de-dollarization within BRICS is also no joke. The Alliance’s members consist of 4.1 billion people – more than half of humanity. Right now, these nations represent 27% of global gross domestic product (GDP), and their economies are growing rapidly. Some economists predict that BRICS will be the majority of global GDP by 2050, with China representing over $ 70 trillion alone.
If half of the world’s GDP and the world’s largest economy were to contact the dollar and use Yuan Or a Brics currency instead, it would dramatically reduce the demand for the dollar and would certainly affect its value and the US’s ability to exercise it as a weapon. While Western countries or companies are unlikely to save in China or Russia, it may not matter if the majority of the world’s economic activity is in Brics itself.
So Brics probably can’t replace USD completely, but it can put a tooth in it. If China continues to rise and becomes the world’s largest economy of nominal GDP, it can lead to a meaningful challenge for dollar dominance. Ironically, this can help the United States in several ways. A weaker dollar means that its debt would be less worthwhile, would make us export more affordable and would reduce the trade deficit that the current president is so angry with.
When you think about it in that light, these Stablecoins may not be such a good idea, Mr. Lutnick?
Look: Find ways to use CBDC outside digital currencies
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