It has been widely reported that a common BRICS currency will be discussed at a symposium next month. However, Bank of Russia Governor Elvira Nabiullina stated that launching a common currency could be challenging.

There have been claims that the output of the economies of Brazil, Russia, India, China and South Africa (BRICS) is now greater than the combined G7 economies. The statement adds weight to the potential impact of a new currency.

Our own research found that it depends on the source of the data. Using the World Bank GDP statistics for 2022, we find that the combined GDP of the G7 is 69% higher than that of the BRICS. In fact, the GDP of the BRICS is only marginally larger than the US economy.

But that last statistic is relevant since the United States dollar is the dominant world currency. However, the size of the economy is only one factor contributing to the dollar’s dominance.

Russia’s views on the BRICS currency

According to the state-run RIA news agency, the governor of the Bank of Russia spoke about a possible BRICS currency at a recent press conference. “Of course, this idea deserves attention, but I think that this project will be quite difficult to implement, like any idea of ​​​​a supranational currency. It requires the consent of many parties,” Nabiullina said.

She has a point. The BRICS summit in August has highlighted the challenges. Vladimir Putin wants to attend the summit in South Africa, but the International Criminal Court has issued an arrest warrant for him. China is not a member of the court, but the other four countries could not agree to move the event there.

Nabiullina continued: “This is not a simple project at all. Therefore, we continue working and concentrating our efforts on the development of bilateral settlements in national currency, the development of the infrastructure that connects our payment systems, what companies need today, now”.

Coordination could become more complex if the group expands beyond five. The BRICS nations created the New Development Bank in 2015. Six years later, it admitted Bangladesh and the United Arab Emirates, with Egypt becoming a member earlier this year. Uruguay is a potential member.

Others have pointed to the need to develop technology for the coin. China has extensive experience gained from its national digital yuan CBDC and as the technology driver behind the MBridge CBDC for cross-border payments including Hong Kong, Thailand and the United Arab Emirates.

The Bank of Russia maintains its focus

Nabiullina’s views do not necessarily reflect those of Russian politicians. However, despite significant lobbying around cryptocurrency legalization and other efforts to address sanctions, Nabiullina appears to have maintained a consistent position.

Recent reports of one of Russia’s major banks testing for commercial crypto payments appear to avoid breaking the rules when buying crypto outside of Russia.

Russia has special legislation for real-world tokenized assets, so-called digital financial assets, such as tokenized precious metals. Originally these could not be used for payments, but Russia recently updated the laws to allow their implementation for cross-border settlement.

a digital ruble

On the subject of legislation, the Russian Duma recently passed legislation for a digital ruble central bank digital currency (CBDC). It still has to be approved by the upper house, the Federal Council, but that is expected this week. If approved, the legislation will go into effect on August 1. This has delayed the launch of a digital ruble pilot, which will include 13 banks.

The currency does not earn interest and payments are free for end users. Merchants pay 0.3% for transactions.