Odaily Planet Daily News: Goldrepublic content architect Alexej Jordanov stated in an article that BRICS countries have shown strong interest in developing a gold backed digital currency, which is one of the efforts to reduce international trade dependence on the US dollar. The article was published on Friday by the Official Monetary and Financial Institutions Forum (OMFIF).
Jordanov discussed how geopolitical changes, including Russia's exclusion from the SWIFT payment network, are driving the EU to explore alternative settlement systems. If the proposed single currency is implemented, it may be pegged to gold and a basket of BRICS currencies, and distributed ledger technology (DLT) can provide transparency and security. US President elect Trump has stated that if the BRICS countries introduce a currency that challenges the dominance of the US dollar, he may impose 100% tariffs on it. It remains to be seen whether this stance will lead to specific actions after Trump's inauguration. Jordanov explained, "For the BRICS countries, a digital currency supported by gold can bring great benefits. Reducing transaction costs and minimizing exchange rate fluctuations are some of the tangible benefits
He explained in detail that the BRICS countries account for 40% of the global population and create over 30% of the global GDP, slightly higher than the G7. Despite its strong economic strength, the US dollar still dominates global trade, and the role of BRICS currencies is relatively small. The intra BRICS trade has grown by 56% since 2017, accounting for 37% of the total intra group trade volume in 2022. Jordanov believes that implementing a gold based currency can reduce transaction costs and exchange rate risks.
The article outlines the operation of the system: "By tokenizing gold reserves, each digital unit will be supported by tangible assets stored in a secure vault and regularly audited to ensure accountability. Smart contracts can dynamically adjust currency weights to reflect trade patterns and economic conditions. This will enable real-time settlement, reduce delays, and cultivate trust among participants. Such a system may even attract countries outside the BRICS seeking alternatives to the US dollar dominated network, potentially increasing the global trade share of the BRICS group to over 18% of its current level
He pointed out that the BRICS countries hold a total of 5700 tons of gold, accounting for 16% of global reserves, while the G7 holds 17500 tons, accounting for 49%. Jordanov acknowledges the potential benefits, but also emphasizes the challenges, stating: "Some of the potential benefits of gold backed digital currencies are obvious, but implementation is not easy. Effective coordination among BRICS countries is needed, and investment in technological infrastructure is also required. Geopolitical obstacles, including potential sanctions and tariffs, further increase complexity. Nevertheless, with its strategic gold reserves and economic influence, the BRICS group may continue to push forward the idea of reshaping global finance and provide an alternative to the dollar centric order." (Bitcoin.com)
