During the recent BRICS 2023 summit in South Africa, there were no indications of the introduction of a digital currency as had been earlier predicted.
Instead, the countries committed to enhance the utilization of local currencies as opposed to the use of the U.S dollar.
In the major development, the organization, which includes Brazil, Russia, India, China, and South Africa is poised to add 6 new countries in 2024 i.e:
- Argentina
- Egypt
- Ethiopia
- Iran
- Saudi Arabia
- The UAE
“We are concerned that global financial and payment systems are increasingly being used as instruments of geopolitical contestation,” said Cyril Ramaphosa, South Africa’s President.
“Global economic recovery relies on predictable global payment systems and the smooth operating of banking, supply chains, trade, tourism as well as financial flows.”
The Johannesburg II declaration, issued jointly, promotes the utilization of local currencies for trade among BRICS nations as well as with other trading partners.
The declaration stated:
“We task our Finance Ministers and/or Central Bank Governors, as appropriate, to consider the issue of local currencies, payment instruments and platforms and report back to us by the next Summit.”
The members of the community are already working on various cross-border initiatives including some that involve digital currencies, which could impact the trajectory of intra-trading within the bloc.
For instance, both China and new entrant UAE are engaged in the MBridge platform, which facilitates cross-border payments using digital currency in partnership with the Bank for International Settlements (BIS). Additionally, there have been speculations about Russia and Iran collaborating on the development of a digital currency initiative.
Both India and the UAE have recently unveiled intentions to collaborate on initiatives involving cross-border Central Bank Digital Currencies (CBDCs). Meanwhile, they are concurrently intensifying efforts to enhance the utilization of their respective local currencies in cross-border transactions.
The Abu Dhabi National Oil Company (ADNOC) and the Indian Oil Corporation Limited (IOCL) successfully carried out their inaugural transaction involving a million barrels of oil under the Local Currency Settlement (LCS) framework.
This mechanism is aimed at diminishing fees and expediting settlement times by circumventing the multi-day delays often associated with transactions involving U.S dollars.
As reported by Reuters, the Reserve Bank of India has encouraged banks to commence the utilization of Indian Rupees and UAE Dirhams for trade activities between the two nations.
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