By VT - Managing Editor -June 26, 2023

The BRICS bloc, which gathers some of the most emerging economies of Brazil, Russia, India, China and South Africa, has recently provided guidance regarding using currencies for international trade. The diplomats representing the countries have met in South Africa for a conference to discuss subjects like financial inclusion.

In terms of opening and currency adoption, these countries engaged in technological development since the release of digital coins like Bitcoin. South Africa, for example, is currently a hub for digitalization since it allowed the creation of an ecosystem where developers and users could benefit from the use of cryptocurrencies.

Locals can check their BTC coin price on their mobile phones and invest, which is a better alternative than government-based financial institutions.

All BRICS countries agreed on the advantages of using the newest digital tools. At the same time, the group discussed the possibility of creating a unique currency that would only be used within the BRICS nations, which will be again approached at the next meeting in Johannesburg this August.

But what does this decision mean for the cryptocurrency industry, and how can BRICS provide a legal and updated legal framework on their use within the bloc?

The relationship between BRICS and trading partners will improve

The countries’ representatives met in South Africa and debated the importance of local currencies in international trade and financial transactions between the bloc and worldwide partners. BRISC plans to develop its own currency that would help include citizens’ efforts in the organization’s economic growth and prosperity. Considering their development plans, multiple countries wish to be associated with the BRICS bloc, such as Argentina.

Currently, the bloc targets the improvement of each of its country’s currencies in an attempt to bring them to a similar level of economic evolution. At the same time, BRICS is working to deepen the relations between its countries.

What do experts believe about this movement?

After the meeting, experts and economists analyzed the bloc’s proposal and came up with a brief explanation of what adopting a common currency would mean for people. It’s believed that such a move would create a true advantage next to the dollar’s value and diminish differences between the countries regarding economic power.

Considering the struggle of producing goods and services to access dollars, while the US federal reserve simply prints more money to finance the deficit, promoting the idea of a unique currency for BRICS would significantly change the course of its innovation. More countries develop new methods of relying less on the US dollar as a way to improve trading settlements by focusing on their currencies. This shift also comes as protection from US laws on other countries territories.

However, specialists warned that this movement would not take form or benefit the population if the BRICS participants continued prioritizing trade with the US due to political or historical concerns. They also stated that creating a new currency would take effort from BRICS leaders to change their policies. Currently, a considerable part of the BRICS bloc trades more through the US dollar than their own currencies, which will be difficult to change.

How the adoption of digital coins would save the world from US hegemony

In terms of economic stability, the US dollar is risking the world’s financial growth through hegemony. One of the recent examples of this occurrence can be seen in the pandemic when the US abused its economic power and left developing countries to pay the price. And let’s not forget about the worldwide crisis in 2008 that started in the US and expanded to multiple countries.

Considering this phenomenon, experts are discussing the possibility of using cryptocurrencies as an alternative to US power so that all countries’ citizens would have the liberty and opportunity not to be affected by worldwide events when it comes to storing value.

Bitcoin is solely prioritized in this discussion as it survived complex changes through the years and is still a reliable alternative to fiat money and traditional finance. Cryptocurrency and its blockchain have the potential to bring change and provide an alternative to a physical commodity-backed currency.

However, this practice has its limitations, despite being already introduced in many countries. If BRICS adopts Bitcoin, it would have to be fully trusted to be a stable choice; at the same time, it needs to be audited, and a proper legal framework would need to be devised to control the flow of the currency, which would oppose its decentralization features.

Why is Bitcoin a better alternative to fiat money?

Since its deployment on the market, Bitcoin has been both a controversy and a blessing by worldwide consumers and traders. The cryptocurrency was meant to bring financial stability and freedom from the institutionalized economic systems, considering it’s not controlled by anyone and is maintained only by nodes.

Bitcoin can be used as a store of value and an exchange unit. Compared to gold and fiat money, digital currencies have high portability, durability, security and ease of transaction standards. The only disadvantage is sovereignty, which hinders the worldwide adoption of Bitcoin, even though investors constantly discuss it.

However, one of the biggest challenges of Bitcoin, and cryptocurrencies in general, is its high volatility. This makes it difficult for users to generate steady and constant income. It all depends on supply and demand, media coverage and worldwide events, so these digital coins are still easy to be influenced by outside factors. At the same time, its sustainability concerns will make it difficult for citizens who value the care for our ecosystems, considering how much energy it takes for only one bitcoin to be mined.

Final considerations

The BRICS group recently met to discuss financial challenges and opportunities, finding that a universal currency would reduce financial difficulties in these countries. Still, many challenges are considered in this movement. The bloc will therefore meet again to elaborate on this plan while other countries are waiting to be included in BRICS, which is believed to have overpowered the G7.