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Macroeconomist Lyn Alden has cast doubt on a proposal that would see five countries work together to develop a common BRICS currency \u2014 arguing it will likely struggle to get off the ground and fail to dethrone the United States dollar. <\/p>\n
In an interview with Cointelegraph just days before the BRICS annual summit in South Africa, Alden explained that it will be \u201cvery hard\u201d for BRICS members \u2014 Brazil, Russia, India, China and South Africa \u2014 to form a gold-backed currency for widespread use.<\/p>\n
Russian President Vladimir Putin first announced that BRICS proposal to create an international reserve currency at the BRICS summit in 2022 to rival the U.S. dollar as the global reserve standard. This proposal was later confirmed to come in the form of a gold-backed currency.<\/p>\n
However, Alden argued the model is flawed. <\/p>\n
\u201cBacking a fractional-reserve banking system with gold only works temporarily, because the currency units multiply more quickly than the gold does,\u201d she said.<\/p>\n
Instead, Alden sees a more likely outcome would be that BRICS nations lessen its reliance on the USD for cross-border payments by increasingly using their own currencies for trade \u2014 particularly the Chinese yuan.<\/p>\n
\nThe BRICS hold G7 currencies as their reserves, and not the other way around. And yet, the BRICS just flipped the G7 in economic size.<\/p>\n
Reserve practices don\u2019t change overnight, but this is a very different environment than 10+ years ago. https:\/\/t.co\/khoH1Cbvp8<\/p>\n