Limited Usage of BRICS Currencies
Perhaps the most significant economic barrier to a successful BRICS currency initiative is the minimal global usage of its member nations’ existing currencies. Despite China’s position as the world’s second-largest economy, its currency, the yuan (renminbi), accounts for less than 5% of global payments, compared to the U.S. dollar’s 47%.
A 2023 research paper from the Carnegie Endowment for International Peace noted: “The amount of renminbi available outside of China remains quite limited relative to the dollar, and the currency’s cross-border usage in payments is greatly eclipsed by the dollar’s role (and it could be negatively affected by a weakening Chinese economy).”
This limited international usage of the yuan, which would likely be the dominant component of any BRICS currency basket, presents a major economic obstacle to the initiative’s success. Without substantial existing usage, creating demand for a new currency becomes extremely difficult, regardless of political declarations or agreements.
Divergent Economic Structures
Jack Truong emphasizes that the diverse economic foundations of BRICS members create significant barriers to currency coordination. “Brazil focuses on agricultural and mining sectors, Russia on energy reserves, India on services and a burgeoning technology sector, and South Africa is in the process of diversifying its mining-centric economy,” he points out.
“And then there is China, a manufacturing behemoth with global infrastructure investments and domestic market woes,” Truong continues. “This intricate web of competing economic agendas will quickly entangle any currency initiative.”
These fundamental economic differences make the coordination of monetary policy extremely challenging. What benefits China’s export-driven economy might harm India’s service sector or Brazil’s agricultural exports. The economic cycles of energy-dependent Russia differ substantially from those of manufacturing-focused China or service-oriented India. These divergent economic structures and interests would make establishing and maintaining a cohesive currency policy virtually impossible.
Economic Stability and Volatility
Economic stability is a prerequisite for a trusted global currency, and Jack Truong highlights the significant disparities in this area between the United States and the BRICS nations. “America’s diverse economy, political stability, and military prowess endow the U.S. dollar with robust integrity and strength,” Truong asserts.
In contrast, BRICS countries face significant internal and external challenges that undermine economic stability. Truong identifies “economic volatility, authoritarian governance issues, and geopolitical uncertainties” as factors that impede universal acceptance and confidence in their currencies.
Economic data supports this assessment. The Russian ruble has experienced dramatic volatility in recent years due to sanctions and geopolitical tensions. The Chinese yuan faces pressures from property market challenges and economic slowdown. Brazil has historically struggled with inflation and currency stability issues. These economic vulnerabilities make it difficult for global markets to place the same level of trust in BRICS currencies as they do in the U.S. dollar.
Infrastructure and Transaction Costs
The economic efficiency of dollar-based transactions represents another barrier to BRICS currency adoption. Decades of infrastructure development have created highly efficient systems for dollar-denominated trade and finance. Shifting to an alternative currency would impose significant transition costs on businesses and financial institutions worldwide.
Truong points out that creating the infrastructure necessary for a new global currency would require enormous investment and coordination — further complicated by the lack of consensus among BRICS members. Without this infrastructure, transaction costs for a BRICS currency would likely be higher than for dollar-based alternatives, creating an economic disincentive for adoption.
Economic Policy Independence
Another economic challenge identified by Jack Truong is the desire of BRICS nations to maintain independent economic and monetary policies. Unlike the Eurozone, where member nations surrender monetary policy control to the European Central Bank, BRICS members would be reluctant to cede such sovereignty.
