Could a BRICS-centered group of countries step up to provide a new reserve currency capable of inspiring confidence, better serving  the needs of Global South countries, and helping to stabilize the international monetary landscape? How would this currency be constructed? Is it truly needed?

The BRICS members, as well as a number of non-BRICS countries of the Global South, have taken some steps towards reducing their dependence on the dollar, including by increasing bilateral transactions in their national currencies and moving away from the dollar and US Treasuries in the composition of official reserves. Could and should they go beyond that and establish an alternative reserve currency, together with an alternative cross-border payment and messaging system?

Discussions of these alternatives have not progressed much within the BRICS as a group. Skepticism mixed with fear seems to have prevailed so far. The dominant view can be summarized in two arguments: a) transactions in national currencies of the BRICS and other countries, bypassing the dollar, are working well enough; so, b) why go to the technically complex and politically confrontational step of creating alternatives to the dollar. Indian officials, for instance, have sometimes voiced these arguments, not only within BRICS but also publicly.[ Smith, Yves (2024). ]

The prevailing view is, however, only partly correct. It is true that a new cross-border payment and messaging system and, especially, a new reserve currency would be seen as confrontational by the US. The BRICS, or some of them, will probably think twice before moving in this direction. Only modest steps have been taken so far by the group. For instance, the Russian proposal, made in 2024, of a BRICS Cross-Border Payment Initiative (BCBPI), although endorsed as the basis for further work in the BRICS Summit in Kazan,[ BRICS Russia 2024 (2024b, paragraphs 65-67).] made very little, if any, progress since then. There is no question that an attempt to build an alternative such as the BCBPI will encounter suspicion and resistance from the US and allies.[ Nogueira Batista Jr., Paulo (2025b, p. 8-12).]

A new reserve currency would face even more rejection. The US has a long-standing aversion to anything that risks weakening the dollar’s international status. Donald Trump has made repeated threats and aggressive statements on the topic, including the wild claim that, for the US, losing the dollar’s international reserve status would be “like losing a world war”.[ Business Today (2025). ] Resistance to any alternative to the dollar is unlikely to soften in future Administrations, given the existing bipartisan consensus in the US on the view that the dollar’s centrality is vital, economically and politically.

There is, hence, no doubt that taking steps to construct alternatives to the dollar and the Western financial system will involve some confrontation with the US, especially under Trump, but even beyond his term. The BRICS might try to clothe any initiative in cautious and neutral language, as they usually do, but Americans and Europeans are bound to quickly see through that. It has been suggested,[ Mozhin, Aleksei (2025, p. 33).] for instance, that we start off by defining a basket of BRICS currencies, a simple and harmless step that would supposedly not generate controversy. This argument has failed to persuade and for good reason. The creation of such a basket would immediately spark the question: what purpose does it serve other than to function as a transitional mechanism to a new reserve currency?

It is useless to beat about the bush. If alternatives are to be seriously considered, political will and courage are indispensable requirements. Whether this is available in the BRICS or in other parts of the Global South is another matter. The record so far may not be encouraging. Nevertheless, the glaring and increasing deficiencies of the Western system can be expected, sooner or later, to force the BRICS, together with some other countries, to brace themselves and come forward with alternatives.

The more so that the second argument of the currently prevailing view is fundamentally flawed. This point must be stressed once again since misunderstandings abound. The truth of the matter is that transactions in national currencies work well to a certain extent but have severe limitations.
To fully understand this point, one needs to go back to first principles. Why do economic agents require a common monetary standard? Or, put more starkly, why has money always existed in recorded economic history? First, because it is impossible to match in time, quality and quantity the desired buying and selling decisions. The needs of a buyer of a certain good, service or asset will not coincide with the seller’s supply. In other words, except in rare circumstances, the demands of economic agents will not exactly correspond the availably of suppliers. Second, in the absence of direct exchanges of products, a commonly accepted means of payment is always necessary. At the same time, even for barter, economic agents need a general equivalent of value, i.e., a unit of account in which all products can be expressed so as to make trade possible. Third, economic agents that have a surplus of sales over spending need to have an instrument to park these surpluses in. Without this, economic agents will not be able to register persistent trade imbalances over time, forcing them to seek to balance each and every one of their bilateral exchanges. Reductio ad absurdum.
In short, barter or barter-like arrangements do not work. There is no such thing as a moneyless economy. A common currency is required to serve as a means of payment, unit of account, and reserve asset. Given that transactions in national currencies do not go very far, an alternative is required.  
One example may further clarify the matter. Take the case of Russia and India. Transactions are mostly in rubles and rupees. Russia runs a bilateral surplus with India and has therefore been accumulating excess balances in rupees. These balances are undesired by Russia since the Indian currency is not convertible and is subject to depreciation risks. The rupee, like all other BRICS currencies (with the partial exception of the renminbi), is not an international reserve currency.

What options does Russia have? For obvious reasons, the dollar and the euro are out of the question. One possibility would be to use the rupee balances for additional purchases from India or to acquire assets in the country. This route will not yield significant results. If profitable opportunities existed for additional imports from or investment in India, they would already have been exploited. Another possibility, somewhat more promising, is to search for countries that have a need for Indian currency. Middle Eastern countries, for instance, that host large number of Indian workers will require rupees to effect transfers to the home country. The central banks of Middle Eastern Countries could be interested in acquiring rupees from Russia, probably with a discount, and sell them to their migrant workers for remittance to India. This possibility mitigates but does not solve the problem. Even if Russia is willing to sell rupees at a discount, there is no guarantee that demand for rupees from third countries would be readily available at all times in the desired quantities. Russia will be mired in a system akin to barter.

For the many reasons given above, it seems advisable to search for a way to construct a new reserve currency.

But it should be stressed, once again, that the goal is not to establish a unified common currency issued by a common central bank, as is often claimed. Nothing like the euro is being envisaged since the BRICS or any BRICS-centric group are very far from minimally fulfilling the stringent criteria for a common monetary area. The constant repetition of this false claim is a sort of straw-man, attributable less to ignorance of monetary economics than to bad faith, i.e., an attempt to paralyze the discussion by offering a non-viable alternative to the status quo.[ Although often repeated in the debate on international monetary alternatives, this straw-man is rarely presented for what it is. For my own previous discussion of this, see Nogueira Batista Jr., Paulo (2025a, p. 20, 21).] This distracting maneuver has worked, to some extent, if one is to judge from the frequency with which the straw-man appears in BRICS discussions.

The non-viability of a unified currency seems clear. The BRICS  or any other conceivable group of relevant Global South countries do not fulfill any of the preconditions that have be met for monetary unification, such as strong trade and financial integration, reasonably synchronized business cycles, labor and capital mobility, fiscal risk-sharing and budgetary coordination, convergent inflation, and macroeconomic alignment.[ The classical work on this topic was done by Mundell, Robert (1961).] None of these conditions are met or can be met in the foreseeable future by the BRICS or another group of Global South nations. And, to my knowledge, none of the economists that take part in this discussion have ever envisaged a unified currency, euro-like currency. Even the euro area, a region of the world that stands out for its level of economic integration, has struggled to guarantee the smooth functioning, sometimes even the survival of its unified currency.

What could be constructed is something fundamentally different from the European experience: a new standard for external transactions and international reserve holding. If created, it will not replace the currencies of the participating countries. Their currencies and central banks would continue to exist as before. National currencies would continue to be the only ones enjoying legal tenure status within the territories of the countries concerned. The new currency would circulate in parallel to the national ones and not alter the conduct of national monetary policies or other typical central bank functions. It would be digital and could draw on the experience of some countries in constructing central bank digital currencies (CBDCs).

Editor: Zhiyu Wang