In a groundbreaking maneuver set to challenge the economic dominance of the BRICS nations (Brazil, Russia, India, China, and South Africa), Germany has initiated a bold move—a significant leap toward the widespread adoption of the digital euro.The BRICS consortium, long seen as a formidable force in global economics, has faced a potential disruptor in the form of the European Union’s economic powerhouse. Germany's recent strides in the realm of digital currency have sparked intense debates and speculation regarding its potential to counter the sway of the BRICS nations.
The BRICS alliance is looking to launch a new currency to challenge the US dollar and the Euro in the global currency market. Sergey Glazyev, Russia’s former advisor to the President confirmed early this month that BRICS currency is “almost ready” for launch. Reports suggest that the alliance could launch the currency in the 16th summit next year in 2024. The development coincides with Germany’s idea of creating a digital Euro to combat other currencies in the market.
Germany's CBDC Strategy: A Counterbalance to the Emerging BRICS Currency
As the global economic stage brims with anticipation over the impending launch of a currency by the BRICS alliance, all eyes turn to Germany, raising questions about its intentions regarding Central Bank Digital Currency (CBDC). Speculations are rife about whether Germany sees CBDC as a strategic move to counterbalance the influence of the forthcoming BRICS currency.
Legislators throughout Europe, not just in Germany, are attempting to establish national digital currencies in order to adapt to the shifting financial landscape. While over 150 countries are currently developing CBDCs(Central Bank Digital Currency), only a few have launched pilots as of this year, according to reportsEuropean legislators appear to be opposed to the Germany digital Euro, and the CBDC may not contest the BRICS currency. A digital Euro is not supported by all of Europe, and the European Union is divided regarding the creation of a CBDC. Although a small number of EU member states support the CBDC, the rest have expressed interest in the notion that a digital currency is unnecessary.Reports have it that failure by the United States, Germany, and the European Union to counter the BRICS currency after its introduction could prove disastrous for the West.
When will BRICS launch their currency?
Brazil’s President Lula presented a bold proposal during the BRICS summit on August 23, 2023. He urged the BRICS members to work together to develop a unified currency designed for intra-group trade and investment. While the West is divided on the prospects of CBDCs, the BRICS bloc has accelerated the development of its expected currency. BRICS could issue its own currency before the digital Euro is available on the international market. The initiative puts the BRICS currency ahead of the digital Euro, US dollar, and other major global trade currencies.Furthermore, Lula has previously advocated for the Mercosur region to adopt a shared currency. Mercosur is a South American trade bloc. According to Lula, a BRICS currency gives an opportunity to “increase our payment options and reduce our vulnerabilities.” It’s a powerful argument in an era of global economic uncertainty.
Russian President Vladimir Putin first proposed the BRICS idea for a worldwide reserve currency in 2022, challenging the US dollar’s role as the world’s reserve currency. The planned BRICS currency would be gold-backed.The journey toward a digital euro-dominated economy is fraught with challenges and uncertainties, yet its potential to revolutionize the global economic arena cannot be discounted. Germany’s audacity to take on this challenge reflects a pivotal moment in the evolution of international finance—one that could redefine economic power dynamics in the years to come.
(Ira Singh, Asstt Editor)