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- India’s central bank has proposed that BRICS countries link their digital currencies to enable faster and cheaper payments within the bloc.
- India wants to add this proposal to the agenda for this year’s BRICS Summit in what would be a big threat to the dominance of the US dollar in global trade.
India’s central bank wants BRICS members to consider a proposal to link their countries’ digital currencies to facilitate trade and reduce their reliance on the U.S. dollar.
The Reserve Bank of India has recently made the proposal to the government and wants it to be on the agenda for the BRICS Summit, set to be held in the second half of this year in New Delhi as part of India’s chairmanship. According to two unnamed sources who spoke to Reuters, the RBI says interlinking the CBDCs could make cross-border payments between the members easier, faster and cheaper.
BRICS is a bloc consisting of 11 full members and over 10 partner countries, with China, Russia, Brazil, India and South Africa as founding members. As we have reported, the bloc has been increasingly seeking ways to de-dollarize, with a common currency, CBDCs and a gold-backed system among the proposals.
Interlinking the CBDCs of some of the world’s largest economies would be the boldest step in the bloc’s shift away from the greenback. However, the RBI declined to confirm the proposal, with others like China and Brazil declining to comment, according to multiple news outlets.
Can BRICS CBDCs Dethrone the US Dollar?
While the proposal would be a landmark step in the BRICS-US rivalry, none of the bloc’s members have launched their CBDCs.
China remains the most advanced. The East Asian giant has been edging ever closer to a full launch and has been spending vast resources to promote the digital yuan within its borders and in neighboring jurisdictions like Hong Kong and Vietnam, As we reported, the Chinese government pledged to start paying interest on CBDC holdings this year, further incentivizing its people to use the digital yuan.
India has also accelerated its CBDC efforts. It claims that over 7 million Indians now use the digital rupee, even as the government positions it as a better alternative than stablecoins. Brazil, South Africa and Russia are further behind in the CBDC race. Other newer members have also made strides in developing a digital currency, with the UAE one of the members of mBridge, the most advanced cross-border CBDC project currently.
The main BRICS members have previously expressed their support for initiatives that unite their payment rails. However, they have acknowledged that challenges abound, including enabling interoperability between the disparate systems.
Trade imbalance also poses a challenge. Russia, for example, exports way more to India than the other way around, and by accepting the rupee for payments, would end up with a much larger stash of the Indian currency.
There’s no guarantee that the CBDC interlinking project will pan out. However, even if it doesn’t, it serves a critical purpose: it signifies yet another step toward moving away from a US-centric global order.
Kester Kenn Klomegah, a policy consultant for the Eurasian Union, summed it up:
The main thing is that the process of searching for new models by the states dissatisfied with the United States policy has started, which means the end of the dominance of the United States in all spheres of international relations.
