Last week media reported that the BRICS countries are discussing the creation of a single cryptocurrency payment system. The system will be allegedly based on a specialized cryptocurrency, as stated by the head of the Russian Direct Investment Fund (RDIF) Kirill Dmitriev during the BRICS summit. He said:
“The development of national payment systems and their sustainable integration are an important factor in the economic partnership between the BRICS countries in the face of increasing non-market risks of the global payment infrastructure.”
The payment system is said to allow the BRICS countries to make settlements with each other, as well as reduce the dependence of the national currency on the US dollar. According to project representatives, over the past five years, the share of the US dollar fell by 42% in foreign trade transactions, while the share of the Russian ruble grew by 11%.
Blockchain and crypto as tools for XXI century hybrid wars
If a unified payment system is launched, the project will allow for reducing dependence on other currencies, ensuring the stability and speed of settlements between the BRICS countries. In this case, the BRICS countries will be able to invest in collaborative projects without any problems.
One of the possible reasons behind such initiative is that about 60% of the world's foreign exchange reserves are US dollar-denominated. At the same time, US dollars are used in 80% of global payments and in almost 100% of energy market transactions.
The announcement has been actively discussed in the majority of the Western media outlets and according to CIA adviser Jim Rickards, existing payment systems carry certain risks for countries that can compete with the United States on the world stage. He commented on this matter:
“America’s rivals are forced to use dollars to trade with each other. This makes dollar payment systems – Fedwire, the ACH Network, and SWIFT – chokepoints the US can apply to its rivals’ economies. Without access to these systems, they can’t access the dollars they need to participate in global trade. That’s like shutting off the oxygen on a patient in intensive care. That person’s going to die.”
Are the BRICS countries ready for the launch?
To date, Russian legislation doesn’t have ready-made laws that would regulate the cryptocurrency industry. Therefore, before taking part in this project, Russia needs to test and finalize the regulatory ecosystem, which will allow the government to introduce clear rules for the use of digital money in the country. The relevant legislation has been developed since 2017, with the draft law prepared and adopted by the Russian State Duma on first reading last year. In November this year, Russian entrepreneurs appealed to President Putin with a request to speed up the process.
Meanwhile, the Chinese government’s stance on the existing cryptocurrency market seems to be rather ambiguous. This can be seen in Beijing’s rhetoric, which has been changing from approving to reprimanding. The topic of cryptocurrency in China is making world media outlets’ headlines in November.
Vlad Miller, CEO of Ethereum Express, said:
“It's important to understand that China is on the verge of launching the state cryptocurrency. Therefore, the article published on Xinhua approves cryptocurrencies in general, but notes the frequent illegal use of Bitcoin in view of its anonymity and expresses doubts about its decentralization. This is what can be called the protectionist and partly political point of view.”
It turned out earlier that the alleged Chinese cryptocurrency will have little in common with blockchain technology. Probably, the BRICS leaders are still not ready for action but are actively looking for solutions against the backdrop of increased US sanctions, while seriously considering the possibility of using blockchain technologies.
What is gold for here?
on world stock exchanges. While the stock market is falling, the price of gold is rising. The problem is that with serious falls, investors start actively selling gold. Beginning investors should also be aware of these intricacies since gold is still a stock exchange commodity, not money, although it has retained some monetary functions.
According to Jim Rickards, the real plan of China and Russia in an attempt to break the dominance of the US dollar is the desire to replace it with gold. Perhaps, this is the reason why Legacy Research Group predicts a significant increase in prices for this precious metal.
The struggle for leadership in the global economic arena has already begun. It’s a long, controversial and multilateral, but largely objective process. Recall that in the 19th century Great Britain was not only a “workshop of the world”, but also a “world cab driver,” and quite naturally – a “world banker”. In the 20th century, the US economic power allowed the creation of the Bretton Woods system, which used the US dollar as a world fiat currency. Moreover, among the fiat currencies, there is no worthy alternative to the dollar, so something fundamentally new is required.
According to Rickards, “it [possible solution] has to do with the technology behind bitcoin – the distributed digital ledger known as a ‘blockchain’”.
He claims that China and Russia are creating a distributed digital registry similar to what lies at the heart of bitcoin to undermine the system of foreign exchange payments controlled by the United States.
The struggle of several countries probably continues along with the confrontation between gold and bitcoin, and this will be no less interesting to observe.