There is anticipation over whether important decisions will be made at the 18th BRICS summit to be held in Delhi regarding a new payment system as an alternative to the U.S. dollar.
The BRICS grouping was formed in 2006 by India, Brazil, Russia, China, and South Africa. Later, Egypt, Ethiopia, Iran, the United Arab Emirates, Saudi Arabia, and Indonesia joined as members.
As the BRICS grouping completes 20 years since its inception, India is chairing the grouping this year. Accordingly, the 18th BRICS Summit will be held at Bharat Mandapam in Delhi on Sept. 12 and 13.
Leaders including Russian President Vladimir Putin, Chinese President Xi Jinping, and Iranian President Masoud Pezeshkian are set to participate in the conference, which will be held under the theme “Building Resilience, Innovation, Cooperation, and Sustainability.”
BRICS countries account for 49.5 percent of the world’s population, 40 percent of global gross domestic product (GDP), and 26 percent of world trade, so this summit is seen as significant at the international level.
Moreover, there is growing anticipation among countries outside the BRICS grouping about what kind of stance BRICS is going to take on various issues that threaten the global economy, such as the Russia-Ukraine war, the Iran-US war, the closure of the Strait of Hormuz, and US President Donald Trump’s tariff policy.
Meanwhile, there is also expectation over whether decisive announcements will be made regarding the devaluation of the dollar, known as “de-dollarization,” which BRICS countries have long been trying to pursue as part of efforts to gradually reduce the dominance and use of the US dollar.
Why de-dollarization?
At present, global trade across the world runs entirely on the U.S. dollar. For example, if a company in Chennai wants to buy crude oil from a company in Moscow, it cannot simply purchase it directly.
For this, the international interbank messaging system called SWIFT (SWIFT - Society for Worldwide Interbank Financial Telecommunication) is used. First, the money from the Chennai-based company’s bank is converted into dollars at an international bank, then into Russia’s currency, the ruble, and the payment is transferred to the Moscow company. A service fee is charged for this.
The two countries that do not use the dollar are in a situation where, for money transfers, they have to twist their heads to touch their noses.
All banks that carry out this practice must be members of the SWIFT system. In this situation, during the Ukraine-Russia war, SWIFT removed several major banks belonging to Russia. As a result, Russia’s trade was severely affected. This served as a major warning to the BRICS member countries.
What is BRICS Pay?
To tackle challenges like these and reduce the dominance of the dollar, the BRICS Business Council introduced a digital transaction system called “BRICS Pay” back in 2018.
Rather than being a BRICS currency, efforts are being made to create a cross-border digital payment framework.
BRICS Pay connects digital payment platforms such as India’s UPI (UPI), Russia’s SPFS (SPFS), China’s CIPS (CIPS), and Brazil’s Pix (Pix).
“BRICS Pay” was showcased at the BRICS Business Conference held in Moscow in October 2024. From the end of that year, it was introduced on a pilot basis for foreign tourists in some regions of Russia.
For example, a tourist traveling from India to Russia can download the BRICS Pay app, scan a QR code, and pay at Russian stores. The equivalent value in Indian currency will be taken against the Russian currency, the ruble. As a result, tourists no longer need to wait at airports to exchange Indian currency for Russian currency.
In the future, if people living abroad make payments to bank accounts in their home countries through BRICS Pay, the hefty service charges will be reduced.
At present, BRICS Pay is linked in Turkey, Sri Lanka, Egypt, and the Maldives, and a target has been set for BRICS Pay to handle 20 percent of global trade by 2030.
India's new proposal
As the next step for BRICS Pay, India has proposed integrating central bank digital currencies (CBDCs).
Central bank digital currencies are digital money issued by each country’s central reserve bank. Examples include India’s e-rupee and China’s digital yuan. Earlier this year, India proposed that if the digital currencies of the BRICS countries are linked, it would benefit everyone from tourists to small and micro traders.
Speaking at a conference held in Mumbai last August, Reserve Bank of India Governor Sanjay Malhotra said that BRICS countries are actively discussing the integration of fast payment systems and central bank digital currencies.
What is Trump going to do?
China, which conducts 30 percent of global trade in yuan, India, which has expanded UPI digital payments to 9 countries, and Brazil, which dominates Latin America through the Pix payment system, can come together to enhance BRICS Pay. If CBDCs are linked, a Chennai trader could send money to Moscow in an instant without the help of the dollar.
As a result, a situation will emerge in which more than half of global trade is conducted based on the local currencies of BRICS countries.
Already, U.S. President Donald Trump has warned that if an alternative currency to the dollar is created, a 100 percent tariff will be imposed against BRICS member countries.
But the BRICS countries’ response is clear. They have said, “We do not want a currency against the dollar; we carry out transactions by giving importance to local currencies.”
Will a new payment system as an alternative to the dollar be announced at the BRICS summit, undeterred by President Trump’s threats? Let’s wait and see!