Russia, China and BRICS Nations Plan to Create New International Reserve Currency – Economics Bitcoin News

While inflation data in Europe and the United States rose significantly last month, Russia and members of the BRICS countries revealed that leaders of the top five emerging economies are “creating an international reserve currency”. Analysts believe the BRICS reserve currency is set to rival the US dollar and the International Monetary Fund (IMF) currency with special drawing rights (SDRs).

Vladimir Putin reveals the creation of a new international reserve currency at the 14th BRICS Summit Turkey, Egypt and Saudi Arabia consider joining the BRICS

Over the past month, the West has struggled with scorching inflation and skyrocketing energy prices. Politicians in the UK, Europe and the US have tried to blame the economic calamity on a number of things like the Ukraine-Russia war and Covid-19.

Last month’s consumer price data in America and Europe rose to all-time highs, and many analysts say Western countries are in a recession or are about to experience one. Meanwhile, at the end of June, members of the BRICS nations met at the 14th BRICS Summit to discuss world affairs.

Aiming for US Dollar Hegemony: Russia, China and BRICS Nations Plan to Create New International Reserve Currency
The five leaders of the BRICS nations from China, Russia, Brazil, India and South Africa.

During the BRICS summit, Russian President Vladimir Putin announced that the five-member economies – Brazil, Russia, India, China and South Africa are planning to issue a “new global reserve currency”.

“The question of creating the international reserve currency based on our countries’ currency basket is under review,” Putin said at the time. “We are ready to work openly with all trade fair partners,” he added. Furthermore, Turkey, Egypt and Saudi Arabia are considering joining the BRICS group. Analysts believe the BRICS move to create a reserve currency is an attempt to weaken the US dollar and the IMF’s SDRs.

Aiming for US Dollar Hegemony: Russia, China and BRICS Nations Plan to Create New International Reserve Currency
At this year’s BRICS Summit, Russian President Vladimir Putin announced that a new international currency developed by the BRICS was in the works.

“This is a move to address the perceived US hegemony of the IMF,” ING’s global head of markets Chris Turner explained in late June. “It will allow the BRICS to build their own sphere of influence and currency units within that sphere.”

Although the news of a reserve currency created by the BRICS may come as a surprise to some, there have been specific reports of member countries contrasting the US dollar for some time now. In late May 2022, a Global Times report noted that members had been urged to end their addiction to global dollar dominance.

Russian trade relations and the BRICS countries are intensifying Chinese President Xi Jinping says countries “obsessed with a position of strength” and “seek their own safety at the expense of others” will fall

Putin explained the following month that “contacts between Russian business circles and the business community of the BRICS countries have intensified”. The Russian president also noted that Indian retail chains would be hosted in Russia and Chinese cars and hardware would be imported regularly. Putin’s recent statements and comments at the BRICS summit have led people to believe that BRICS members are no longer “just a ‘conversation shop'”.

In addition to South Africa, Russia has also increased foreign aid and delivered weapons to sub-Saharan African countries. Furthermore, Putin and other BRICS leaders have targeted US hegemony and exceptionalism in specific statements published in the media.

Aiming for US Dollar Hegemony: Russia, China and BRICS Nations Plan to Create New International Reserve Currency
Putin has criticized and condemned the US and the West for financial sanctions on various occasions over the years.

At this year’s St. Petersburg International Economic Forum, Putin addressed the crowd with a 70-minute speech and spoke about the United States that has ruled the world financial system for years. “Nothing lasts forever,” Putin said. “[Americans] they consider themselves exceptional. And if they think they are exceptional, it means that everyone else is second class, ”the Russian president told forum attendees.

Speaking to Russian ambassadors in a biennial speech, Putin said the West is weakening a lot in terms of economic power. “The internal socio-economic problems that have worsened in industrialized countries as a result of the (economic) crisis are weakening the dominant role of the so-called historical West,” Putin remarked to the ambassadors. “Be ready for any development of the situation, even for the most unfavorable development”.

Russia and Putin say US dominance in the world of finance has been dying for years now. Speaking at the Valdai forum in October 2018, Putin said US approval of specific countries (including Russia) would undermine confidence in the US dollar.

The Russian president noted that most of the fallen empires have made the same mistake. “It is a typical mistake of an empire,” the Russian leader declared at the time. “An empire always thinks it can afford to make small mistakes, to take extra costs, because its power is such that it means nothing. But the amount of those costs, of those errors inevitably grows “. Putin continued:

And there comes a time when it cannot manage them, neither in the security nor in the economic sphere.

Additionally, in June, Bloomberg released a report on the BRICS Summit and noted that Chinese President Xi Jinping suggested that NATO was responsible for the antagonism with the Russian Federation. Xi also said that some countries that support exceptionalism will falter due to security vulnerabilities.

“Politizing, exploiting and arming the world economy using a dominant position in the global financial system to impose sanctions arbitrarily would only harm others as well as hurt themselves, leaving people around the world to suffer,” Xi explained. “Those who are obsessed with a position of strength, expand their military alliance and seek their own safety at the expense of others will only fall into a security conundrum.”

The financial world splits in half: alternative payment tracks, gold stocks and robust dollar versus ruble clash

The strengthening of the BRICS nations went on well before the start of the conflict in Ukraine. For example, Russia fully developed the Financial Message Transfer System (SPFS) in 2014, and the Mir payment system was subsequently launched. In the same year, in response to the annexation of Crimea, Russia began to accumulate gold in large quantities.

Aiming for US Dollar Hegemony: Russia, China and BRICS Nations Plan to Create New International Reserve Currency
Financial messaging using SPFS has increased dramatically over the years along with the use of CIPS and the Mir payment system.

China also amassed huge amounts of gold, as both countries significantly increased their gold reserve purchases a few years before the war. Russian banks have also joined the China International Payments System (CIPS) making it easier for the two countries to trade. In April last year, China opened its borders to billions of dollars worth of gold imports, according to a Reuters report.

Aiming for US Dollar Hegemony: Russia, China and BRICS Nations Plan to Create New International Reserve Currency
Both China and Russia have accumulated gold in recent years.

Since World War I, the US dollar has been the world’s global reserve currency, and America has emerged as the largest international creditor. Fast forward to today, and the Dollar is booming against a number of other currencies and the USD is the most robust it has been in a whole generation. The US dollar (DXY) currency index gained over 10% this year and outperformed hard currencies such as the Japanese yen.

Just recently, the euro reached parity with the dollar and other currencies such as the Indian rupee, Polish zloty, Colombian peso, and South African rand have faltered against the greenback in recent times. However, the Russian ruble was a strong competitor to the dollar this year and was one of the best-performing fiat currencies in 2022.

With inflation rising and interest rates rising from the Federal Reserve, Kamakshya Trivedi, co-head of a market research group at Goldman Sachs, pointed out that it was a “pretty tough mix” to deal with. Despite the uncertainty, the Goldman Sachs analyst believes the dollar will, at least for now, remain robust. But compared to the recent increase in the value of the greenback, most of that increase is in the past, Trivedi noted.

“For now, we still expect the dollar to trade forward,” Trivedi wrote on July 16. “There may still be a little more to do, but probably most of the dollar move could be behind us.”

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What do you think of the BRICS nations creating a new international reserve currency to rival the US dollar and the IMF’s SDRs? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the News Lead of News and a financial technology journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source code and decentralized applications. Since September 2015, Redman has written more than 5,700 articles for News on the disruptive protocols emerging today.

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