Putin eyes new BRICS financial system to challenge US dollar
Russian President Vladimir Putin is set to propose creating a new financial system at the BRICS summit in Kazan, reports The Economist. This proposal involves the BRICS Bridge digital payment system, which, according to the British weekly, could "deal a blow to American dominance in global finance."
"He hopes (Putin - ed.) that this week's BRICS summit will initiate a big bang that will lift sanctions," the newspaper states.
Putin's plan to defeat the dollar
The Economist notes that BRICS Bridge may incorporate ideas from the mBridge project, which is partially managed by the Bank for International Settlements (BIS).
China has played a significant role in developing the system and has taken the lead in mBridge software and code. According to sources cited by British journalists, China could use existing solutions to create the BRICS Bridge. Reportedly, such a system could be developed within a year.
The weekly indicates that the BRICS payment system will enable cheaper and faster transactions that may appeal to emerging economies. However, there are other concerns as well.
A method to bypass sanctions?
Western officials do not dismiss the possibility that the program could be designed to circumvent sanctions. This, in turn, could weaken the position of the U.S., which is currently the largest hub for international payments. Washington has gained a strategic advantage over other countries through sanctions.
The most notable initiative involves the use of digital money backed by fiat currencies (currencies not supported by gold or other trade commodities).
In this scenario, central banks would play a central role in cross-border transactions instead of banks that rely on dollar settlements. This would mean that no single country could isolate another from the financial system.
"Commercial banks will conduct transactions through their own central banks, thereby avoiding the need to maintain direct relationships with foreign banks, ultimately bypassing the network effects of the current correspondent banking system," reports The Economist.
Yuri Ushakov, Putin's advisor, highlighted Russia's intentions regarding BRICS in March 2024. At the time, he emphasized that the group of countries aims to create an independent payment system based on digital currencies and blockchain.
The BRICS summit, where Russia plans to challenge the dollar, is scheduled to take place in Kazan, Russia, from October 22-24. This will be the first meeting of the bloc since its expansion at the beginning of 2024, with Egypt, Ethiopia, Iran, and the United Arab Emirates joining the member states (Brazil, Russia, India, China, and South Africa).
