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- BRICS countries have been exploring the possibility of a currency that could dethrone the US dollar in multilateral trade, and this movement is only gathering steam.
- The USD is also under siege from the rise in the usage of Bitcoin, XRP, and other cryptocurrencies which offer more autonomy, economic freedom, and lower fees.
The US dollar is under siege. For decades, the greenback has dominated global trade, accounting for 60 percent of global foreign exchange reserves. However, this could be about to change as countries under the BRICS umbrella cook up their own USD alternative and cryptocurrencies like Bitcoin and XRP gain traction.
The dollar was designated the world’s reserve currency in 1944 at the Bretton Woods conference, and since then, it has dominated all corners of the world. While America’s superior industry and technology have made it the largest economy, it’s the dollar’s global standing that has kept the US in its position.
However, since the turn of the millennia, the USD has continued to lose its dominance. As the graph below shows, the dollar has dipped from over 72 percent domination to 59 percent in the latest figures. Most of this share has been lost to other smaller currencies.
BRICS Plus Crypto—End of the Dollar?
And while the decline has been gradual, a few events on the horizon could lead to a more drastic dip. One is the rise of BRICS, an umbrella body for some of the fastest-growing economies in the world, namely Brazil, Russia, India, China, and South Africa.
Two of the members—Russia and China—are pronounced America’s foes on the global front. Presidents Vladimir Putin and Xi Jinping have been working against the US every chance they get, including casting votes against any proposal by the US or its allies at the UN.
Cumulative, BRICS countries make up 26 percent of the global economy at $27.7 trillion, This makes BRICS a formidable rival of the US and its dollar dominance.
According to IMF data, the share of reserve currencies held in Chinese yuan has been increasing over time. In addition, other countries are keeping an increasing share of their reserves in their local currencies, including the Japanese yen and Canadian dollars.
BRICS, as a unit, has been working on a common currency that can replace the USD in their dealings, and if they manage to chuck away at the USD dominance in their bilateral trade dealings, it could be a significant blow to the USD’s dominance.
And then there’s crypto. While the market has yet to hit the highs it has recorded previously, crypto adoption is surging. In some countries like Venezuela, Argentina, and Zimbabwe, crypto is the currency of choice for locals seeking to escape the volatility of their currencies. This trend has caught on in Europe as well, with Turks dumping the depreciating lira for Bitcoin, Ether, XRP, and other cryptocurrencies.
The next wave of a massive crypto bull market is on the horizon. This bull run could push the market to new heights and further eat away at the dollar’s dominance.
