Is a BRICS currency a feasible initiative or merely a fantasy? The answer may soon become clear.
Can the BRICS nations (Brazil, Russia, India, China, South Africa) introduce a shared currency to challenge the U.S. dollar's dominant role in the global economy? Although the author was involved in creating the "BRICS" acronym and contributed to the group's formal establishment—now expanded as BRICS+ with five additional members—he, like many conventional international economists, remains generally skeptical.
Historical criteria for major reserve currencies require, first and foremost, full capital account convertibility, allowing domestic and foreign investors to move freely in and out of the issuing country’s markets. For a common currency like the euro, a new central banking system must be established, meaning participating national banks would lose their independence, including the ability to set monetary policy based on domestic economic conditions and priorities.
Given these requirements, it is difficult to believe that the ten BRICS+ members would make the necessary sacrifices to support a genuine competitor to the dollar.
In recent months, however, the author has begun to challenge his own assumptions for several reasons: multiple BRICS+ leaders have explicitly voiced opposition to the continued dominance of the dollar, and their economic advisors are no less knowledgeable about monetary history and theory than the author; the current U.S. president is undermining the institutions underpinning dollar hegemony, notably through politically motivated criminal investigations targeting Federal Reserve board members. The Trump administration has also openly rejected America’s role as guardian and provider of global public goods. In the name of "America First," Trump has aggressively pursued tariff policies, leading to a sharp depreciation of the dollar.
The rest of the world is not passively observing U.S. aggression. Most countries, including many long-standing allies, are actively pursuing new trade agreements among themselves. In just the past few weeks, several major deals have been announced: between China and Canada, the EU and Mercosur (Argentina, Brazil, Paraguay, Uruguay), and the EU and India, among others. The U.S. remains the world’s largest economy, accounting for 25% of global GDP, but this also means 75% of global GDP remains open for alternative arrangements.
Furthermore, these developments have led the author to question whether a global reserve currency truly requires free capital mobility. Historically, this argument has only held since the collapse of the Bretton Woods system between 1971 and 1973. The euro has succeeded as a medium of exchange among its member states. It has not become fully internationalized partly because Germany, the largest member, has long been reluctant to directly challenge the dollar and has resisted creating a genuine pan-eurozone bond market.
Given the euro’s success, BRICS+ members—especially the larger economies—could explore establishing a common currency system for settling trade among themselves, even if they remain cautious about full capital account liberalization. The process would inevitably be complex, potentially involving a currency basket composed of members' currencies, weighted according to each country’s GDP. But if it facilitates freer and larger trade within BRICS+, the effort may be worthwhile.
This leads to a final consideration. Proponents of dollar-denominated stablecoins and other digital currencies claim these will extend and deepen dollar hegemony. However, this argument contains a significant flaw: the same technology could equally empower BRICS+ to build alternative payment channels for settling trade among member nations.
Is a BRICS currency a practical step or an illusion? The answer may soon be revealed.
(The author previously served as UK Treasury Minister and Chairman of Goldman Sachs Asset Management.)