New currency for South Africa, Russia and China bites the dust

India’s Reserve Bank is the latest authority to wholly dismiss talk of a new BRICS currency being developed to challenge the US dollar, following threats from US president-elect Donald Trump to retaliate against the bloc for considering the idea.

There has been no decision by the so-called BRICS block about creating a common currency to reduce usage of the dollar, India’s central bank chief said.

“BRICS currency was an idea raised by one of the members and was discussed but no decision has been taken,” Reserve Bank of India Governor Shaktikanta Das said in a post-policy briefing on Friday.

“The geographical spread of the countries has also to be kept in mind, unlike the euro zone which has geographical contiguity.”

The comments come after US President-elect Donald Trump recently warned BRICS nations that he would require commitments that they would not move to create a new currency as an alternative to the dollar and reiterated threats to levy a 100% tariff.

India has been attempting to encourage the use of the rupee in cross-border payments as it seeks to reduce reliance on the dollar.

The move is part of Prime Minister Narendra Modi’s efforts to boost India’s presence on the global stage and position the country as a manufacturing alternative to China in the post-Covid era.

“There is no step we have taken to de-dollarize,” Das said. “We want to derisk Indian trade as dependence on one currency can be problematic at times because of appreciation or depreciation.”

The BRICS group of emerging-market nations — the acronym stands for Brazil, Russia, India, China and South Africa — expanded this year to include Iran, the United Arab Emirates, Ethiopia and Egypt. It discussed the issue of de-dollarization at a summit in 2023.

Hard line

Talk of a new currency for the bloc has been circulating for a few years, and official responses to the notion have always ummed and ahhed while being non-committal and dancing around the topic.

It was heavily speculated ahead of the 2023 BRICS conference that the topic would be finally be officially tabled for discussion—but this never came to be.

At the time, Finance Minister Enoch Godongwana took a hard line on the topic, saying no proposal to introduce a new BRICS currency had been put forward, not even informally, and that none of the countries were ready to deal with the logistics and administration of such a currency.

The finance minister maintained that the only discussion on the table was facilitating trade and finance amongst the BRICS members, which included encouraging the use of local currencies in international trade and transactions between the BRICS bloc and its partners.

Echoing this sentiment in response to Trump’s threat this week, South Africa’s government repeated that there are no plans to create a BRICS currency.

“Recent misreporting has led to the incorrect narrative that BRICS is planning to create a new currency,” South Africa’s Department of International Relations and Cooperation said in a statement.

“This is not the case. The discussions within BRICS focus on trading among member countries using their own national currencies.”

The bloc’s New Development Bank continues to rely on the dollar for its investments, which have exceeded $30 billion in member states and other developing economies, Dirco said.

“South Africa supports the increased use of national currencies in international trade and financial transactions to mitigate the impact of foreign exchange fluctuations, rather than focusing on de-dollarisation,” it said.

“The strengthening of correspondent banking networks and the development of infrastructure for settlements in national currencies could further this aim.”

While a physical currency is out of the question, one of the BRICS members, Russia, has been pushing ahead with a new digital payments system for the bloc, called BRICS Pay, along with promoting the use of a BRICS digital currency.

BRICS Pay was tested at the BRICS Business Forum in October.

National Treasury said at the time that while “South Africa remains a keen observer of the work being done on BRICS Pay”, it had not committed to it in any way, as the country is still in the early stages of researching and analysing digital assets, stablecoins and Central Banks Digital Currencies (CBDCs).

Reporting with Bloomberg

Read: New currency for South Africa, China, and India makes no sense