HOW WOULD A NEW BRICS CURRENCY AFFECT THE US DOLLAR

Last updated: June 19, 2025, 19:53 | Written by: Sam Bankman-Fried

For decades, the US dollar has reigned supreme as the world's primary reserve currency, a position that grants the United States significant economic and geopolitical leverage. The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, have had many discussions about establishing a new reserve currency backed by a basket of their respective currencies. A BRICS currency was a topic at the 2025 BRICS Summit that took place October 22 to 24 in Kazan, Russia. At the summit, [ ]But what happens when that dominance is challenged?The rise of the BRICS nations – Brazil, Russia, India, China, and South Africa – and their persistent discussions about creating a new currency, potentially backed by gold or a basket of their own currencies, has sent ripples through the global financial landscape. The BRICS nations were widely expected to continue their discussions of creating a potentially gold-backed currency, known as the Unit, as an alternative to the US dollar. The potential BRICS currency would allow these nations to assert their economic independence while competing with the existing international financial system.The question on everyone's mind is: how would a new BRICS currency affect the US dollar? This isn't just about shifting trade routes; it's about potentially reshaping the entire world order.This article delves deep into the heart of this complex issue, exploring the potential impacts, the challenges, and the likelihood of a successful challenge to the dollar's long-held throne.We'll examine the motivations behind the BRICS currency initiative, dissect the potential mechanisms, and analyze the potential consequences for the United States and the global economy. How would a new BRICS currency affect the US dollar? For decades, the US dollar has enjoyed unparalleled dominance as the world s leading reserve currency. As it stands, the dollar is used in over 74 percent of all international trade, 90 percent of currency exchanges, nearly 100 percent of oil trades and just under 60 percent of all foreignBuckle up, as we navigate the turbulent waters of international finance and uncover the future of currency competition.

The BRICS Currency: A Challenge to Dollar Dominance?

The BRICS nations have been vocal about their desire to reduce their reliance on the US dollar in international trade and finance.This sentiment stems from a number of factors, including concerns about US monetary policy, the use of the dollar as a tool for sanctions, and the desire to promote a more multipolar world order.The concept of a BRICS currency is gaining traction, as member nations are seeking ways to assert economic independence and reduce the risk of external economic shocks.

Motivations Behind the BRICS Currency

Several factors fuel the BRICS nations' push for an alternative currency:

De-dollarization: The core aim is to reduce dependence on the US dollar for international transactions, lessening vulnerability to US economic policies and sanctions.
Trade Efficiency: A unified currency could streamline trade within the BRICS bloc, eliminating exchange rate fluctuations and reducing transaction costs associated with using the US dollar. The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar's dominance. However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar's value.This could make trade between member nations significantly more efficient.
Geopolitical Influence: A successful BRICS currency could increase the bloc's economic and political influence on the global stage, challenging the existing Western-dominated financial system.
Reduced Sanctions Risk: A new currency could help BRICS nations and their trading partners circumvent US sanctions, giving them more autonomy in their foreign policy decisions. How would a new BRICS currency affect the US dollar? For decades, the US dollar has enjoyed unparalleled dominance as the world s leading reserve currency. According to the US Federal Reserve, between 19, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79 percent in theIf transactions can be made in a currency outside of the US dollar ecosystem, the impact of US-led sanctions would likely be reduced.

Potential Impacts on the US Dollar

If the BRICS nations successfully launch a credible and widely adopted currency, the potential impacts on the US dollar could be significant, although the extent remains a topic of ongoing debate among experts.

Decreased US Dollar Demand

One of the most immediate impacts would be a potential decrease in demand for US dollars. The BRICS project to create a common currency is generating increasing interest among economists and analysts, as it could redefine global financial balances. For decades, the US dollar has dominated as the primary reserve currency, which gives the United States considerable economic and geopolitical power.As the BRICS nations and their trading partners increasingly use the new currency for international transactions, they would require fewer US dollars.This reduced demand could lead to a gradual decline in the dollar's value.

Consider this scenario: If China, a major importer of goods from Brazil, starts paying for those goods in the new BRICS currency instead of US dollars, Brazil will have less need to hold US dollar reserves.This decreased demand from just one significant trade relationship could have a measurable impact.

Weakened US Sanctions Power

The US dollar's dominance allows the United States to wield significant economic power through sanctions. Banking News The BRICS nations have long discussed creating a new currency to challenge the US dollar s dominance. Recently, they announced plans for a blockchain-based payment system, signaling a significant step toward economic independence. Investors should stay informed about these developments and their potential impacts. BRICS and the Move Toward a New Currency The [ ]Countries that rely on the dollar for trade and finance are vulnerable to US sanctions that restrict their access to the global financial system.A viable alternative to the dollar could weaken the effectiveness of these sanctions, potentially diminishing US influence on the world stage.

For example, countries currently facing US sanctions might find it easier to conduct trade and financial transactions using the BRICS currency, reducing the impact of the sanctions on their economies.

Impact on US Treasury Bonds

Many countries hold large reserves of US Treasury bonds as part of their foreign exchange reserves.If the BRICS currency gains traction, some countries might reduce their holdings of US Treasury bonds in favor of assets denominated in the new currency.This could put upward pressure on US interest rates and potentially increase the cost of borrowing for the US government.

Potential for De-Dollarization

The most extreme scenario is a broader trend of de-dollarization, where countries around the world gradually reduce their reliance on the US dollar as a reserve currency and for international transactions. South African officials had said a BRICS currency was [USN:L1N3960SP TEXT: not on the agenda ] for the summit. In July, India s foreign minister said, there is no idea of a BRICS currency .While a complete displacement of the dollar is unlikely in the near future, a significant shift away from the dollar could have profound implications for the US economy.

However, it is important to recognize the dollar's embedded infrastructure. The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, have had many discussions about establishing a new reserve currency backed by a basket of their respective currencies. A BRICS currency was a topic at the 2025 BRICS Summit that took place October 22 to 24 in Kazan, Russia.According to the US Federal Reserve, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79 percent in the EU.

Challenges to the BRICS Currency Project

Despite the potential benefits, the BRICS currency project faces significant challenges that could hinder its success. The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar s dominance. However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar s value.Creating a new global currency is a complex undertaking that requires overcoming a number of hurdles.

Economic Divergence

The BRICS nations have diverse economies with varying levels of development and different economic priorities. How would a new BRICS currency affect the US dollar? For decades, the US dollar has enjoyed unparalleled dominance as the world s leading reserve currency. According to the US Federal Reserve, between 19, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79Achieving consensus on key aspects of the currency, such as its exchange rate regime and monetary policy, could be difficult. Moved Permanently.This lack of cohesion could undermine the credibility and stability of the new currency.

Lack of Trust

Building trust in a new currency requires strong institutions, transparent governance, and a commitment to sound monetary policy. President-elect Donald Trump has recently issued a stern warning to BRICS nations Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates threatening to impose 100% tariffs on their imports to the United States if they attempt to create a new currency or support alternatives to the US dollar inSome BRICS nations have a history of currency manipulation and governance issues, which could make it difficult to convince other countries to trust the new currency.

It's worth noting that major developed economies like those in Europe, Japan, Canada, and Australia, share many of the US's concerns about BRICS countries, particularly with regard to currency manipulation and governance.

Technical Challenges

Establishing a new currency requires significant technical infrastructure, including payment systems, clearinghouses, and regulatory frameworks.Developing these systems and ensuring their interoperability with existing financial infrastructure could be a complex and time-consuming process.The announcement of a blockchain-based payment system may mitigate some of these challenges.

Political Obstacles

The United States and other Western powers are likely to resist any attempts to undermine the dollar's dominance. Trade Efficiency: A unified currency can streamline trade within the BRICS bloc, bypassing the US dollar and its associated transaction fees. How the BRICS Currency Could Affect the US Dollar. The BRICS currency could significantly alter the landscape of global finance, especially in its impact on the US dollar. Decreased US Dollar DemandThey may use their political and economic influence to discourage other countries from adopting the BRICS currency.

As an example, a previous President of the United States threatened to impose 100% tariffs on the imports from BRICS nations if they attempted to create a new currency or support alternatives to the US dollar.

What Would a Successful BRICS Currency Look Like?

For a BRICS currency to succeed, it would need to possess certain key characteristics:

Stability: The currency would need to maintain a stable value against other major currencies, including the US dollar, to inspire confidence among users.
Liquidity: There would need to be a sufficient supply of the currency available for trade and investment.
Acceptance: The currency would need to be widely accepted by businesses and governments around the world.
Backed by Assets: Backing the currency with commodities like gold and rare-earth metals would allow interest-paying assets denominated in the currency to resemble bonds, potentially increasing demand.

The potential BRICS currency would need to allow these nations to assert their economic independence while competing with the existing international financial system.

The 2025 BRICS Summit in Kazan, Russia

The BRICS nations have continued to discuss the creation of a potentially gold-backed currency, sometimes referred to as ""The Unit,"" as an alternative to the US dollar.The discussions have happened at summits such as the 2025 BRICS Summit, which took place October 22 to 24 in Kazan, Russia.

At the same summit, a total of 13 nations signed on as BRICS partner countries, including Algeria, Belarus, and Nigeria.

Arguments Against a Significant Impact

While the potential impact of a BRICS currency shouldn't be dismissed, there are arguments suggesting its influence on the US dollar may be limited, at least in the short term:

Dollar's Entrenched Position: The US dollar benefits from a network effect, deeply ingrained in international trade, finance, and investment.This makes it difficult for any new currency to displace it quickly. A BRICS currency was a topic at the 2025 BRICS Summit that took place October 22 to 24 in Kazan, Russia. At the summit, the BRICS nations continued their discussions of creating a potentially gold-backed currency, known as the Unit, as an alternative to the US dollar.As it stands, the dollar is used in over 74 percent of all international trade, 90 percent of currency exchanges, nearly 100 percent of oil trades and just under 60 percent of all foreign reserves.
BRICS Internal Challenges: The BRICS nations face their own economic and political challenges, potentially hindering their ability to coordinate effectively on a new currency project.
Limited Trust: As mentioned previously, widespread trust in the institutions and governance of all BRICS nations is a factor.

The Future of Global Currency Competition

The BRICS currency initiative is just one example of the growing trend towards a more multipolar global financial system.As emerging economies rise and challenge the traditional dominance of the United States and Europe, we are likely to see further efforts to diversify away from the US dollar and create alternative payment systems and reserve currencies.This competition could lead to a more dynamic and resilient global financial system, but it could also create new risks and challenges.

The Expert Opinion

The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar's dominance.However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar's value.

How Investors Should Prepare

Given the evolving global financial landscape, investors should take steps to prepare for potential shifts in currency dynamics:

Diversify Currency Holdings: Consider diversifying currency holdings beyond the US dollar to reduce exposure to potential dollar weakness.
Monitor BRICS Developments: Stay informed about the progress of the BRICS currency initiative and its potential impact on the global economy.
Assess Portfolio Risk: Evaluate the potential impact of currency fluctuations on your investment portfolio and adjust your asset allocation accordingly.

Conclusion: A Shifting Global Financial Order

The question of how a new BRICS currency would affect the US dollar is a complex one with no easy answer.While the US dollar's dominance is unlikely to disappear overnight, the rise of the BRICS nations and their pursuit of an alternative currency signal a potential shift in the global financial order.A successful BRICS currency could weaken the dollar's influence, challenge US sanctions power, and accelerate the trend towards de-dollarization. Since the BRICS reportedly plan to back their new currency with gold and other metals with intrinsic value, like rare-earth metals, interest-paying assets denominated in the bric would resembleHowever, the project faces significant challenges, and the ultimate outcome remains uncertain. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what s known as de-dollarization. In turn, this would have implications for the United States and global economies.As investors, it's crucial to stay informed, diversify, and prepare for a future where the US dollar may no longer be the undisputed king of currencies.Key takeaways include:

The BRICS currency aims to reduce reliance on the US dollar and streamline trade within the bloc.
A successful BRICS currency could weaken the US dollar, impacting its value and sanctions power.
The project faces challenges like economic divergence, lack of trust, and political obstacles.
Investors should diversify currency holdings and monitor BRICS developments.

The journey to a new global currency order will undoubtedly be long and complex, but the BRICS initiative represents a significant step in that direction. The introduction of a new BRICS currency poses a major challenge to the US dollar s long-standing dominance in global finance.BRICS, a group consisting of Brazil, Russia, India, China, and South Africa, has long sought to reduce their dependence on the US dollar in international trade and finance.Only time will tell if it succeeds in reshaping the world of finance.