The Shifting Sands of Global Power Dynamics

BRICS Developments, De-dollarization, a Potential Candidate for the Dollar Alternative, and Investment Advice

Feb 14, 2025

The BRICS alliance has entered a new phase of significant expansion, marking a decisive challenge to Western economic dominance. With the addition of Iran, the UAE, Egypt, and Ethiopia, “BRICS9” now represents approximately 45% of the global population and 35% of world GDP when adjusted for purchasing power parity, surpassing the G7's economic footprint.

The bloc's growing influence is particularly evident in key strategic sectors. BRICS nations now control 32% of global oil production and 31% of natural gas production, with Russia and Iran emerging as the world's largest natural gas producers. The alliance also dominates industrial production and critical commodities.

The October 2024 BRICS summit in Russia attracted unprecedented interest, with 15 countries formally applying for membership, including Turkey, Malaysia, and Venezuela. If these potential expansions materialize, “BRICS+” could command over 50% of global population and 42% of world GDP (1). BRICS’ control over certain critical trade routes would expand further (2), fundamentally altering the global economic and trade landscape.

For several years now, the BRICS nations have discussed plans to launch a gold backed currency that would facilitate trade outside of the dollar system. A key focus of the October 2024 summit was developing alternatives to Western-dominated financial systems, including a new payment system called BRICS Pay (3), and increased use of local currencies in trade.

While India has expressed reservations about directly challenging dollar dominance (4), other BRICS nations have been actively pursuing dollar alternatives. In a statement released just prior to the summit, Putin cautioned against developing a new reserve currency at this time “due to differences in the structure and quality of the economies of the BRICS member states” (5). Nevertheless, talk of a BRICS gold-backed “basket” currency has been circulating for several years.

Trade imbalances remain a critical challenge for BRICS nations (6), underscoring the need for a reliable settlement mechanism. The proposed currency would facilitate trade among member nations and other participating countries. Key infrastructure elements include secure payment channels, digital ledgers, and an agreed-upon valuation system. The currency’s success hinges on achieving sufficient membership to ensure widespread usability.

In December 2024, Trump warned BRICS nations against creating a new currency to replace the US dollar, threatening 100% tariffs (7). Kremlin spokesperson Dmitry Peskov responded that such economic pressure would only accelerate the trend of countries switching to national currencies in international trade (8), nevertheless, he denied that a dollar alternative is in the works, stating, "BRICS has not and is not discussing the creation of a common currency" (9).

However, global discussions surrounding the objective of a dollar-alternative have been widely circulating, indicating that nations on the periphery of the US are growing tired of a politicized currency.

One potential candidate for this dollar-alternative, which was allegedly discussed in the October 2024 summit (though valid sources are hard to come by), is a token currency and decentralized monetary system called the “UNIT”, which is based on a fractal monetary design (10). Backed 40% in gold and BRICS currencies, the UNIT aims to offer stability and sovereignty. Operating on distributed ledger technology (11), the UNIT system aims to facilitate fast, low-cost cross-border transactions without intermediaries, supporting greater economic integration and trade amongst user nations. Each UNIT is backed by a specified amount of gold, and the underlying gold reserve is audited regularly to maintain transparency and trust. Each UNIT token is a fully fungible currency unit and is freely exchangeable into gold. According to its makers, the UNIT is neither a stablecoin nor cryptocurrency, “because its intrinsic value is set by a basket of underlying assets, which will fluctuate by the number of tokens issued and changes in the value of each of the underlying assets (12)”.

However, some analysts have rejected the idea of the UNIT as a potential candidate due to its complexity, and geo-economic analyst Simon Hunt recently introduced a compelling, alternative idea to address BRICS payment issues. Hunt's proposal suggests leveraging China's and Russia's substantial gold reserves to create a new payment system that would use the Hong Kong dollar (HK$) as the key currency for global trade. Hunt's plan involves converting USD deposits from Chinese exporters in Hong Kong into HK$ and eventually de-pegging the HK$ from the USD while gradually developing Hong Kong into a major global financial hub that could rival New York and London. This gold-backed HK$ could then be used globally for international trade and investments. This approach could attract global funds to Chinese equities and support China's economic recovery. Over the next five years, it could lay the groundwork for a new BRICS currency, backed by gold, and reshape global financial dynamics (13).

In the end, whether a BRICS currency is a future reality or mere media speculation, the fact remains that with global trust waning, nations are moving toward real, value-backed money rather than the fiat of imperial regimes.

When one considers not only the growing incidences of economic sanctions of one nation or region onto another, but sanctions on individuals by their governments, such as what happened with the Canadian truckers during Covid, it’s hardly surprising that this discontent is seeping into western nations as well. Advances in technology are driving innovative thinking into a futuristic concept of money that could allow more fair and equal access.

Despite these points, a global shift into a new reserve currency has historically taken anywhere from 50 to 100 years, and it is yet to be seen if the rapidity of technological innovation could be an accelerating factor. Nevertheless, a weakening dollar could open the door to investment opportunities in sectors most likely to be affected such as oil and gas, commodities, precious metals, international trade, and tourism. Additionally, investors looking to increase exposure to BRICS equity markets can do so through stocks and ETFs that track BRICS market indices.

Further de-dollarization would also introduce new trading pairs and alter FX rates with increasing volatility. Investors would need to adapt their strategies to the changing landscape by diversifying currency exposure through assets denominated in non-dollar currencies, however, any strategy would require carefully weighing currency and geopolitical stability.

References

The Shifting Sands of Global Power Dynamics

BRICS Developments, De-dollarization, a Potential Candidate for the Dollar Alternative, and Investment Advice

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