According to a recent TASS New Agency report, a proposal by the Russian Direct Investment Fund (RDIF) to create a unified payment system received the support of the BRICS Business Council. Furthermore, the RDIF proposed the creation of a single digital currency, which could be used in settlements. This would essentially reduce the alliance’s reliance on the US dollar.
This is not the first time that the BRICS nations have proposed a unified digital currency. In September 2017, the group proposed the creation of such a currency. Since then, the idea has not gained much traction since then. However, it would appear that the group might take steps to actualize the idea this time. According to Kirill Dmitriev, who is the Director-General of the RDIF, the idea of a common payment system received far-reaching support from amongst members of the BRICS Business Council. The aim would be to ensure the stability of investments and settlement between member nations of the organization.
He also proposed the creation of a common digital currency that would be used inside the payments system. Dmitriev noted that the digital currency would not operate as money but would instead be a paperless document that is used to facilitate transactions. However, he did not make any mention of the blockchain. In the 2018 BRICS summit, member nations agreed to explore the use of blockchain technology in the finance sector.
A Possible Alternative to the USD and SWIFT System
According to an Economic Times report, the BRICS nations might eventually set up an alternative payment system to SWIFT. The reports suggest that China, India, and Russia could start operating a single interbank system. To do this, Russia’s SPFS system would be linked to China’s CIPS cross-border interbank system. India does not have an independent interbank system but it could link its banking sector to Russia’s SPFS via a service that is currently being worked on. The aim of this system might be to challenge the superiority of the SWIFT system and the USD in global finance.
China Might Not be as Enthusiastic
China’s Xinhua news outlet released a statement regarding the issue. However, the statement did not carry much enthusiasm as would be expected with such a major undertaking. This is because China has already been working on a central bank digital currency to rival the USD for the past five years. Labeled the DCEP, it is almost ready for launch and could be unveiled as soon as next year.
Meanwhile, Russia’s RDIF seems quite optimistic about the establishment of an interbank system by the BRICS nations. This would help Russia a great deal; it has faced many financial restrictions due to US sanctions in the past few years. Of all BRICS nations, Russia has been the hardest hit by restrictions imposed on its use of SWIFT. This has forced it to consider alternatives, including the creation of the SPFS interbank system, which is now linked to Iran’s SEPAM system. The only hindrance at this point appears to be China’s plan to issue its own central bank digital currency.