At the forefront of the geoeconomic war of supply chains, economic corridors and trading routes is the dedollarisation movement spearheaded by the Brics collective.

To begin with, what is dedollarisation? To understand this phenomenon, one needs to understand first its antonym – dollarisation.

Dollarisationrepresents US dominance in global finances. It started in the 1920s when the US dollar began to displace the pound sterling as an international reserve currency.

After the US emerged as an even stronger superpower during WWII, the Bretton Woods Agreement of 1944 established the post-war international monetary system, with the US dollar ascending to become the world’s primary reserve currency for international trade, and the only post-war currency linked to gold at US$35 per troy ounce.

In addition, the US Treasury exercises considerable oversight over the Swift financial transfer network, and consequently has a huge sway on the global financial transaction systems, with the ability to impose sanctions on foreign entities and individuals.

Swift stands for the Society for Worldwide Interbank Financial Telecommunications system and it powers most international money and security transfers.

It is a vast messaging network used by financial institutions to quickly, accurately, and securely send and receive information, such as money transfer instructions.

However, rising government spending in the 1960s led to doubts about the US’ ability to maintain this gold convertibility, and gold stocks dwindled as banks and international investors began to convert dollars to gold, resulting in the decline of the dollar.

Facing an emerging currency crisis and the imminent danger that it would no longer be able to redeem dollars for gold, this convertibility was finally terminated in 1971 by president Richard Nixon, culminating in the “Nixon Shock”.

This refers to a series of economic measures taken in 1971 in response to increasing inflation, the most significant of which were wage and price freezes, surcharges on imports, and the unilateral cancellation of the direct international convertibility of the US dollar to gold.

By 1973, the current regime based on the de facto freely floating fiat currencies replaced the Bretton Woods system.

The dollar’s dominance also renders other economies susceptible to fluctuations in US monetary policy, often leading to spillover effects that may not align with their domestic economic conditions.

Furthermore, countries with substantial dollar-denominated debt may face heightened vulnerability to currency fluctuations and capital flow reversals, exacerbating the risk of financial crises.

These factors, combined with the growing economic power of emerging markets and their desire for a more diversified and resilient financial architecture, have spurred many countries’ interest in going ahead with dedollarisation.

Hence, in simple term dedollarisation refers to an increasing trend in recent years towards trade that are conducted in non-dollar currencies between several countries.

This has been attributed primarily to what has been dubbed by leaders of several countries as well as many analysts as the ‘weaponisation’ of the dollar by the US – or imposition of strict sanctions on countries.

A dedollarisation roadmap is expected to be introduced at this annual summit. Indeed, the event is speculated to be capped by the unveiling of key developments that will see it forgo usage of the greenback in favour of local currencies.

Andrey Mikhailishin, head of the task force on financial services of the Brics Business Council, detailed the list of top projects under consideration. These, inter alia include:

Brics Pay – a blockchain-based payment system that entirely bypasses the US dollar. About 159 participants may be ready to adopt this sanction-evading, similar-to-Swift mechanism right away.

Brics Pay is the platform that aims to make transactions between these countries easier in response to the need for a unified system with the main goal of boosting economic cooperation within the Brics nations by simplifying cross-border transactions.

It aims to cut transaction costs and time, decrease reliance on Western financial systems, and protect these economies from currency fluctuations and geopolitical tensions that impact global financial markets.

Brics has announced a new independent payment system based on the underlying technology of blockchain which will be the basis of Brics Pay.

However, the main challenge is the integration of the existing payment systems of each country in a smooth way to make Brics Pay effective.

The system should enable smooth transactions, meaning interoperability between different payment systems, allowing users to easily send and receive money across borders.

Establishing common standards and protocols can help facilitate interoperability and ensure a consistent user experience.

To handle currency exchanges within Brics Pay, the platform might use a real-time conversion system based on prevailing exchange rates or possibly introduce a stable exchange mechanism that could include features like a mutual credit facility.

This would allow currencies to be exchanged directly at agreed-upon rates, minimising exchange rate risks and enhancing trade efficiency among the member countries.

Brics Bridge – also expected to be discussed at the Kazan Summit is a platform for multilateral settlements and payments in Brics digital currencies, connecting the financial markets of Brics members.

It bears similarities with the Bank of International Settlements-linked MBridge, already in effect, and will complement intrabank systems already in action, as in the System for Transfer of Financial Messages (STFM) and Sepam (both being the Russian and Iranian equivalents to Swift respectively), settling financial transactions in their own currencies, which forms 60% of their trade.

According to Russian Federation Council Speaker Valentina Matviyenko, if this system is created, it may use digital currencies of the Brics central banks, and their exchange rate will be tied to the value of national currencies.

“If the Russian-proposed initiative is approved, the Brics countries will have to conduct coordinated legislative work to put a national digital currency into circulation and use it in cross-border settlements,” she added.

Central Bank Digital Currency (CBDC) – by July 1, 2025, the largest Russian banks will have to provide their clients with the ability to conduct transactions in digital roubles.

Pilot testing of the digital currency is underway with 12 banks participating in it.

The digital rouble is an electronic form of national currency, a unique digital code – a token – stored in digital wallets on a special platform of the Central Bank.

The digital rouble could become a fast, convenient and reliable means of cross-border payments, which is important for Russia in the context of sanctions pressure and exclusion from Swift, as well as its dedollarisation policy.

To seamlessly conduct financial operations with its partners, Russia needs a system based on the interaction of national digital currencies.

According to the Central Bank, there are two options: an integration of two platforms, i.e. the digital rouble and other digital currencies; or operations on national currency platforms through a third common system.

Together with the central banks of the Brics countries, Russia is working on creating a new settlement and payment infrastructure that will allow payments to be made in national currencies, including digital ones.

The UNIT Ecosystem – this offers people around the world apolitical money that can be freely bought and sold or used as currency for payments via any open payment and clearing system.

It has already been discussed by the financial services and investments working group set up by the Brics Business Council and has a serious shot at becoming official Brics policy as early as in 2025.

According to Alexey Subbotin, founder of Arkhangelsk Capital Management and one of the UNIT conceptualizers, this is a new problem-solving system that addresses the key geoeconomic issue of these troubled times: a global crisis of trust.

The Global Majority has had enough of the centrally controlled monetary framework put in place 80 years ago in Bretton Woods and its endemic flaws: chronic deficits fuelling irresponsible military spending, speculative bubbles, politically motivated sanctions and secondary sanctions, abuse of settlement and payment infrastructure, protectionism and the lack of fair arbitration.

In contrast, the UNIT proposes a reliable, quick and economically efficient solution for cross-border payments.

It is a game-changer as a new form of international currency that can be issued in a decentralized way, and then recognized and regulated at national level.

The strength of the UNIT, conceptually, is to remove direct dependency on the currency of other nations, and to offer especially to the Global Majority a new form of apolitical money – with huge potential for anchoring fair trade and investments.

It is indeed a new concept in terms of an international currency, anchored in gold (40%) and Brics countries’ currencies (60%).

The UNIT token is not a cryptocurrency because its intrinsic value is determined by a basket of underlying assets, which includes 40% of gold and local currencies backed by certain reserves and freely exchangeable into gold.

Work on an independent payment system immune to political pressure, abuse and external sanctions interference is ongoing as a follow-up to the decisions adopted at last year’s Brics summit in South Africa.

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