BRICS summit in Kazan: Putin's digital challenge to the dollar
The President of Russia, Vladimir Putin, will propose the construction of a new financial system at the BRICS summit in Kazan, reports "The Economist." This involves the digital payment system BRICS Bridge, which, according to the British weekly, may "deliver 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 reads.
Putin's plan to defeat the dollar
"The Economist" reports that BRICS Bridge might borrow concepts from the mBridge project, partially managed by the Bank for International Settlements (BIS).
China contributed to the system's creation and took the initiative in the development of mBridge software and code. According to sources, British journalists believe China could use existing solutions to create BRICS Bridge. It is noted that such a system could be developed within a year.
The weekly states that the BRICS payment system will provide cheaper and faster transactions, which could attract developing economies. However, these are not the only concerns.
A method to bypass sanctions?
Western officials do not rule out that the program could be developed to circumvent sanctions. This would, in turn, weaken the position of the U.S., which is the largest international payment hub. Washington has gained an advantage over other countries through sanctions.
The most serious initiative is the plan to use digital money backed by fiat currencies (currencies that are not supported by gold or any other assets of commercial value).
In this case, central banks will be at the centre of cross-border transactions, instead of banks with access to dollar settlements. This would mean that no country would be able to cut another off from the financial system.
"Commercial banks will carry out transactions through their own central banks, so they will not have to maintain bilateral relations with foreign banks, bypassing the network effects of the current correspondent banking system," reads "The Economist."
Yuri Ushakov, Putin's advisor, mentioned Russia's plans regarding BRICS in March 2024. Even then, he pointed out that the group of countries is striving to create an independent payment system based on digital currencies and blockchain.
The BRICS summit, where Russia is set to challenge the dollar, will be held in Kazan, Russia, from October 22 to 24. It will be the first meeting of this expanded bloc, which saw Egypt, Ethiopia, Iran, and the United Arab Emirates join earlier in 2024, along with the current members (Brazil, Russia, India, China, and South Africa). The summit will take place in the Eastern Time zone.
