Image: President Xi Jinping and P.M. Narendra Damodardas Modi
In light of the recent BRICS gathering in South Africa, it's stirred up a hot topic in my circle of nerds. The burning question is: Will the BRICS nations band together to launch their own currency, potentially as a rival to the U.S. dollar?
So what are the BRICS?
BRICS is an acronym for Brazil, Russia, India, China, and South Africa. The term was originally coined in 2001 by Goldman Sachs economist Jim O'Neill, who predicted that by 2050, the four BRIC economies (Brazil, Russia, India, and China) would come to dominate the global economy. South Africa was added to the group in 2010, changing the acronym to BRICS. The BRICS nations represent about 40% of the global population and a quarter of global gross domestic product. The group was formed to imprve economic conditions within the member countries and give their leaders the opportunity to work in collaboration regarding these efforts.
To get to the bottom of that intriguing question, let's take a journey through my thought process. Specifically, I want to focus on the strides that some of the major players in BRICS, namely India and China, have made in the realm of digital currency.
In my opinion, the article "How India's Central Bank Helped Spur a Digital Payments Boom" highlights the significant growth and achievements in India's digital payments ecosystem. Here are the key points:
1. The Reserve Bank of India (RBI) played a crucial role in fostering a digital payments boom by implementing policies and initiatives to make transfers easier and safer. They allowed multiple bank accounts on the same mobile platform for individual and business use.
2. The RBI collaborated with private firms and established partnerships to create a robust digital payment network. This cooperation between the central bank and private entities has been instrumental in driving the growth of digital payments in India.
3. The RBI's goal was to provide a public good by becoming an umbrella institution for the digitalization of retail payments. This approach of providing digital financial infrastructure is seen as relevant for all economies, regardless of their stage of development.
4. The digital payments ecosystem in India has witnessed billions of transactions, indicating the significant progress made in this sector.
5. RBI Deputy Governor Rabi Sankar, who oversees payment systems and financial technology has been actively involved in shaping and overseeing the growth of digital payments in India.
Overall, India's digital payments ecosystem has experienced remarkable growth, thanks to the efforts of the RBI and collaborations with private firms. The adoption of digital payments has made transfers easier and safer, benefiting individuals and businesses alike. This growth showcases the potential of digital payments in transforming the financial landscape of the country.
China:
China has made significant progress in the development and implementation of its digital currency, the digital yuan. Here are the key points:
1. China began exploring the concept of a digital currency in 2014 and conducted the first actual test of the e-CNY system in 2020 with an initial trial launch in several cities.
2. The digital yuan, also known as e-yuan or e-CNY, is a blockchain-based cryptocurrency controlled by the People's Bank of China. It aims to provide a centralized payment system and reduce the dominance of tech companies like Alibaba and Tencent in the payment industry.
3. The digital yuan has been piloted in 15 provinces and has been used in more than 360 million transactions totaling over 100 billion yuan (approximately $13.9 billion).
4. China has distributed the digital yuan through lotteries and participated in cross-border exchanges with several nations, demonstrating its commitment to testing and expanding the use of the digital currency.
6. While there is no clear date for a full-scale launch of the digital yuan, China's goals in creating a digital currency are focused on modernizing its financial system, increasing convenience, lowering transaction fees, and providing greater financial inclusion.
Overall, China's progress with its digital currency, the digital yuan, showcases its commitment to digital finance and its potential to revolutionize the financial landscape. The widespread adoption and impact of the digital yuan are yet to be fully realized, but China's advancements in this area have positioned it as a leader in the global digital currency race.
The answer:
While the idea of a common currency among BRIC nations has been discussed, the development of individual digital currencies and the challenges of cooperation among members make it unlikely that a single currency will be adopted.
The development of digital currencies by China and India ddemonstrates a focus on modernizing their financial systems and reducing the dominance of tech companies in the payment industry while their central banks being more ... CENTRAL to everyday banking. It hard to see all of this progress put aside to create something where the adoption and infrastructure is nascent and low in the other partner countries while their risk profiles are quite high.
