BRICS Nations Are Attempting to Dethrone the Dollar — Will They Succeed?
- Jonathan Quek
- May 1
- 4 min read
Will the US dollar remain the dominant world currency
The History Of BRICS
Funny enough — the acronym BRIC (South Africa joined a year after the initial alliance forming BRICS) was a concept not invented by any of the BRIC nations, but rather by an economist at Goldman Sachs by the name of Jim O’Neill. Jim had introduced the acronym BRIC to describe fast-growing economies (Brazil, Russia, India, and China) that could potentially reshape the global economic landscape.
In 2009, the BRIC nations held their first summit in Yekaterinburg, Russia. The countries expressed common interest in establishing reforms to the current world’s financial system that is dominated by the United States.
In 2010, South Africa joined BRIC forming BRICS. Today, BRICS is 9 countries strong. Its new members include Iran, Egypt, Ethiopia, and the United Arab Emirates. Over 40 countries have also expressed interest in joining BRICS including countries such as Indonesia, Venezuela, and Malaysia. BRICS has grown to become a real contender to the G7 countries, with its current members holding over 35% of global GDP (to 30% for G7 nations), and 45% of the world’s population (to 10% for G7 nations).
Ultimately, BRICS has shown itself to be a powerful new alliance that is positioned to dethrone the leaders of the old world. But what exactly is this alliance attempting to do and why?
Why Are They Attempting to Dethrone the Dollar?
Today, the United States continues to hold vast influence and control over the world’s financial system. Thanks to the incredible liquidity of the US dollar and the size and stability of the US economy. The dollar has remained the global reserve currency; 88% of all international trade are transacted using the dollar making it the most powerful currency in the world.
On top of that, the US has significance influence over SWIFT (the society of worldwide interbank financial telecommunications). SWIFT is a system created by the G-10 central banks that connect banks all over the world. This system greatly increases the speed, convenience, and affordability of international transactions and has become a key pillar of our global economy.
The US has not been afraid to use its financial power to impose sanctions on countries, and prevent them from accessing SWIFT or trading using the dollar. And these aren’t just hypothetical sanctions the US can impose. In 2012 and 2018, the US imposed sanctions on Iran limiting their access to international trade and curtailing oil exports. Select Russian banks were also banned from the SWIFT network, prompting them to move to their own native banking messaging system. The US has also imposed similar sanctions on Belarus, Syria, and North Korea, showing that it’s not afraid to cudgel its opponents using its mighty financial power.
BRICS nations, particularly China and Russia, have expressed displeasure towards such sanctions, stating that the US is using its financial dominance to subjugate its rivals. As such, one of the main goals of BRICS is to form an alternative transaction process that can avoid the dollar entirely. They have already begun experimenting with alternatives to the SWIFT system, as well as floating the idea of a new unified currency that can challenge the dollar. All of this beckons the question: will they be successful in dethroning the dollar?
Will They Be Successful?
In a recent series of messages, Trump has threatened 100% tariffs on BRICS nations should they attempt to introduce a new currency. This comes as no surprise as the dominance of the dollar is one of the key strategic advantages the US has over any other nation. Being the dominant world currency, the US has incredibly leverage and control in international trade and global financial transactions. Should the dollar fall off, it could spell a Thucydides trap for the US.
It will be no easy task to dethrone the dollar. Ever since the Bretton Woods Conference in 1944, the US dollar has been the dominant currency globally with very negligible fall in its position as the world’s reserve currency. Till today, no other currency is or has been close to the US dollar.
With that being said, we should not be so quick as to proclaim that the US dollar will remain in power forever. Over the last 500 years, we have seen 6 different global currencies come and go. These include: Portugal (1450–1530), Spain (1530–1630), Netherlands (1640–1720), France (1720–1815), Great Britain (1815–1920), United States (1944-today). Each of these currencies lasted about 100 years or so, which is not far off from how long the dollar has been the dominant currency for. Of course, if there is one thing that economics teaches, it is that the past does not determine the future. Yet such a scene of history still serves as a poignant reminder that nothing ever last, not even the greatest and most powerful economies.
Although BRICS nations have yet to come close to an alternative system to SWIFT, the closest rival CIPS (a China-based interbank system) has shown increasing adoption in countries that are trading with, and in close geographical proximity to China. However, they have yet to come up with any unified system across the BRICS nations and are even further away from producing a rival to the US dollar.
How do you imagine the future of global currencies? Will the US continue to reign supreme, and if so for how long? Or will BRICS be the new G7 and revolutionize the world’s financial system?
Leave your thoughts here!
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