BRICS Coin – The Unit versus The Dollar
The next meeting of the BRICS group of nations is pivotal. Not only do Brazil, Russia, India, China and South Africa look to welcoming a new tranche of members into the club; but we also expect an announcement about a new currency regime. BRICS has grown from a talking house to a true international institution – and it is about to step out from the shadow of American hegemony.
In this article we will gain an overview of the key building blocks of the BRICS financial system including the proposed ‘Unit’. We will delve into the geopolitics that underlie the bloc’s metamorphosis and equivocate on the future of their evolution. Let us start with the geopolitics which have fertilised the fields for the growth of BRICS coin.
The BRICS vs. The West
The BRICS is made up of the aforementioned nations from their acronym, as well as Iran, Egypt, UAE and Ethiopia. It agglomerated in 2009 to form an alliance of non-Western states as a counterpoint to the domination by European, then American empires in the 20th century. It emerged as little more than a talking shop modelled after the West’s G7 – where states would co-ordinate policy.
Yet as the 21st century unfolded, the Western states acted increasingly belligerently. Through continuing wars in the Middle East, little thrift was given to non-Western states on the global stage. The USA in particular played a loose hand geopolitically – always preferring to force its own interests at the cost of diplomacy and trust. This accelerated and relations between the West and East deteriorated, pivoting over military tensions in Central Europe (Ukraine), and the West Pacific (Taiwan) in particular. Today we have the abhorrent prospect of violence and ‘hot’ war; the precursor was a decade of ‘cold’ economic warfare.
The USA engaged with Russia and China using the policy of sanctions. The USA would limit trade in certain fields which it deemed politically useful, for example in energy and technology. One example was the US Dept. Of Commerce declaring Huawei, a Chinese telecoms company, as harmful and banning its products from the USA. Yet America went further still against its perennial enemy: Russia. Since 2014, after the Maidan coup against Yanukovich in Ukraine by NATO, relations between the USA and Russia deteriorated. The USA and EU began breaking off relations, severing trade relationships and then commenced economic sanctions. These included banning goods produced in Russia, banning financial institutions as well as banning Russian media from the West. Russia responded with commensurate sanctions and the rift began to deepen. Other key sanctions were the removal of Russia from the SWIFT system of international transfer, and the theft of Russian assets held in Western banks. All of this poisoned the well of good will between states and harmed the USA’s reputation as a trade partner internationally.
After a decade long proxy conflict we now see that the sanctions, aimed at hobbling Russia, have really made Russia turn in and strengthen. Even British State media admits “Russia’s economy grew by 2.2% in 2023” despite over 16,500 individual sanctions. Similarly she has sought to foster and grow ties with China and the other BRICS member states. The USA has abused its ‘exorbitant privilege’ of being the world’s reserve currency by using it as a weapon. Indian Exterior Ministe Jaishankar put it succinctly last week:
“Sometimes you make it difficult in the use of dollars. We have some trade partners with whom trade in dollars becomes difficult because of your policies. We have to look for workarounds.”
The Unit
The Unit is the proposed form of workaround that the BRICS are brewing. This ‘New Currency Unit’ (NCU) is to be the eponymous BRICS coin.
It has been floated and developed since at least 2019, when the Association of Russian Banks released a video of BRICS Pay – their payment app – in action.
It shows a portly wealthy Russian purchasing a bottle of Wine from a high-end Muscovite boutique. Perhaps one could levy the claim that it is not in-touch with the average citizen who will be using the payment rail, but it works to show the political class how the app works. Something I will describe here:
The app allows the vendor to access funds in their own national currency from their national bank. That national bank then makes a demand from their central bank. That central bank builds up a balance of trade (for example 100 Indian transactions in Russia). The central bank of Russia then settles with the central bank of India using a token (clumsily nick-named NSRB : New Silk Road BRICS token), India will have debited the BRICS pay account of the buyer at the point of sale, via an Indian bank, and the transaction is paid for and settled in seconds using a web of high speed computer networks. This is better than the current system where Russia could end up with an excess of Rupees, as happened in a 2023 oil trade.
To clarify: this system has a number of important innovations. Firstly the use of blockchains. The NSRB token will be run on a blockchain. It isn’t bitcoin or even really a cryptocurrency – we must be clear in our thinking to not be befuddled by preconceptions. Even though their flashy website has a ‘whitepaper’ and looks every bit the cryptocurrency project, it is centrally managed by nation states. We will see if The Unit Foundation, the group behind The Unit will keep their promise of creating ‘apolitical money’. Nevertheless the blockchain is used here to keep a ledger of every transaction, including a mass of data on the users, location, time and amount etc.
Second is the use of CBDC: Central Bank Digital Currencies. I have written extensively on the topic and suffice as to say I believe these are the end of financial freedom – a gilded cage. Here they are to be used at the settlement layer that is to be the interlocutor between national currencies, Rubles Rupees and Yuan, and the NSRB token. This echoes the BIS’ mBridge system – but as Russia is currently excluded from the BIS they are forming their own mBridge. Each nation will have control over its CBDC and monetary policy, the CBDC will feed down to national banks who will do the dirty work of managing people’s accounts day to day. So for the user, there will not be a great difference between a bank account of today and a BRICS pay account. They will still earn and pay in their local currency. But the cloud of transaction above them will be markedly different.
The third innovation, which is most important geopolitically, is the re-introduction of gold into the currency. The BRICS coin – my name, or to use their nomenclature New Unit of Currency (NUC), New Unit of Account (NUA) and New Silk Road BRICS token, will be backed by gold. Something we have not had internationally since the 1970s when Nixon put the final nail in the coffin of the Gold Standard when he ‘temporarily’ closed the US gold window – meaning US treasuries could no longer be redeemed for American gold. We then had an era where the USA printed inordinate amounts of paper money and inflated the value out of the world’s economy. Gold is an anchor in physical reality and a constraint in monetary policy. Thus when BRICS+ create The Unit, backed 40% by gold, 60% by BRICS currencies, we know they mean business.
Lastly we must highlight the NDB – New Development Bank. This was created in 2015 and was the first body that the bloc instantiated. It began as a small (in terms of the global economy) investment bank. BRICS nations would but money into a pool and the NDB would distribute it to projects within BRICS nations deemed important. This usually meant infrastructure like dams, highways, water supplies and so on. Yet over the last few years as the BRICS coin snowball has picked up pace – the NDB has become the lightning rod for financial innovation. It is now touted as an alternative for the IMF. The BRICS NUA will even mirror the IMF’s SDR basket of currencies.
The International Monetary Fund is not popular in the global South. It often saddles small nations with huge debt burdens and forces then to adopt neoliberal policies to allow vulture capitalists to hoover up resources – neo-colonialism. Perhaps the NDB, allowing preferential access to Russia, China, India and more, with a gold-backed Unit in tow will be a much more attractive partner for these states as time goes on.
A la Kazan!
And so, to Kazan. This year, 2024, the BRICS+ bloc will meet in Russia, in the city of Kazan for their annual meeting. It is touted as one of the most important yet. We have the applications of over 40 nations to consider, including gulf states and NATO member Turkey. We have the BRICS+ Business Council issuing decisions about The Unit and perhaps announcing the creation of a new economic order. Plus we expect some declarations about the continuing escalation of violence in Ukraine and the Middle East, onto which Western states seem to be pouring petrol rather than seeking diplomacy. I see it as the necessary emergence of a multipolar global order as the USA’s hegemony reaches the end of its 100-year reign. Particlurlarly China and Russia do not want to see one country dominate through imperialism, rather a system of multicurrency mercantilism, to borrow the term of Kathleen Tyson.
We also reach a pivotal time for gold in the golabal economy. It is reaching all-time-highs in all currencies – indicating the value of sed currencies evaporating away. People are flocking to gold as a safe harbour for value. This will benefit the bigger holders of gold proportionately more. China holds an estimated 25,000 tons but has also disbursed a similar amount to its citizens through sales at the Shanghai Gold Exchange. This marks a pivot away from the historical center of gold dealing: the London Bullion Market Association (LBMA) which was created by the Bank of England to throttle the gold market. The UK for comparison holds just of 310 tonnes of gold.
Whilst the gold bugs are chomping at the bit for the announcement of a gold-backed BRICS coin, and the geopolitical order in the world island of Asia-Europe certainly needs stabilising. I have a cooler prediction for Kazan. I believe that the BRICS+ will continue to expand, and continue to grow its projects in the financial sphere. But I don’t believe they will rush out The Unit this year. China, Russia, India and other big nations are looking at the centuries long timeline and they cannot afford to slip up. Their bloc is not a political union like the EU but more a diplomatic center. Thus there requires a longer lead time of deliberation. Furthermore, the announcement of a competitor for the dollar might just be too much for the deathly-ill American system. Already a cornered beast – with no active president at the helm, unpopular wars abroad and multifarious economic woes at home, it would be ill advised to poke this beast. Rather I believe the BRICS will take a Confucian policy, or perhaps the Tsu-ian route and let its enemies die by their own mistakes. But we will certainly gain some clarity this October and see if BRICS+ can conjour up monetary magic a la Kazan.
Sources:
Huawei banned from USA in 2019
Timeline of US-Russia sanctions from 2014
https://www.rferl.org/a/russia-sanctions-timeline/29477179.html
BBC admits Sanctions haven’t stopped Russian growth
https://www.bbc.co.uk/news/world-europe-60125659
BRICS-pay system
Russia-India oil trade generates excess Rupees
https://www.reuters.com/markets/currency-clashes-sour-russias-oil-trade-with-asia-2023-11-27
Universa: the BRICS choice of blockchain
The Unit Foundation’s flashy website
Blake Lovewell: 7 pillars of a Global CBDC system
BRICS New Independent Payment System demonstration
https://digitalbankbrics.com/media/NIPS_Presentation_EN.pdf
BIS mBridge system of CBDC exchange
https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm
Sputnik: De-dollarization bombshell, BRICS decentralised monetary ecosystem
Escobar: BRICS Bretton Woods in Kazan
https://www.zerohedge.com/geopolitical/escobar-will-brics-bretton-woods-take-place-kazan
Turkey’s accession to BRICS
Multicurrency Mercantilism: Kathleen Tyson