This article might receive some backlash from Americans, please know my purpose of this is not to badmouth any country, but to point out possibilities, opportunities and dangers.
What is de-dollarisation?
BRICS
Possibility
Main Factor: Currency
How does this affect me?
Negative Impact
Positive Impact
Notes on the topic
Sources.
Simply put: Would you invest in a company with debt, squabbling amongst employees, accusations of fraud, theft, conspiracies, while their products are being produced by a different company. Looking at the USA as a company that people would invest in (USD), it’s pretty straight forward to see that not many investors would show interest in the company. This is ultimately an oversimplification of the situation, but easily sums it up.
I was once, probably like you, reading yet another post on the term “de-dollarisation”, thinking that it would never happen, because that was just the way that it has been, and probably always will be. Why change it if it isn't broken? But I’ve recently realised, it is broken, and the chances of it happening, are actually greater than I thought.
For the purpose of this article I have (to an extent) disregarded #Bloomberg as a source as a few of their articles on the matter are contradictory, lacking concrete evidence instead filling articles with percentages seemingly trying to “give the readers what they want to read”, losing credibility.
What is de-dollarisation?
The U.S. dollar has been the dominant global reserve currency for decades, with many countries holding a significant portion of their foreign exchange reserves in dollars. This has given the United States significant economic and political leverage globally.
De-dollarization is the process where countries or economies move away from relying heavily on the U.S. dollar as a global reserve currency and as a medium of exchange for international trade and transactions.
Many people believe that sanctions against Russia and other countries have been the major drive for other countries to move away from the dollar, but this has been in motion since after World War II with the Bretton Woods Agreement. However, concerns about US control over the global financial system emerged as early as the 1960s. Sanctions will always be around as long as there is international trade and relations between countries. But there are multiple reasons, such as reducing their dependency on the U.S. economy and its policies, which can impact other countries. Any other country having the upper hand creates a situation of potential economic coercion or pressure to act in the interests of the country even if it goes against cultures and laws of their own countries. And Diversifying foreign exchange reserves to mitigate risks associated with holding too much of a single currency.
Promoting the use of domestic currencies in international trade and transactions is another reason, but recently there has been a shift of this reason and acceleration, that being because of the #BRICS alliance.
BRICS
The bloc was initiated by Russia as an informal club in 2009 to provide a platform for its members to challenge a world order dominated by the United States and its Western allies. The heads of state and government of the member nations convene annually with each nation taking up a one-year rotating chairmanship of the group.
Brazil, Russia, India and China are the founding members, and South Africa joined in 2010. Since then over 40 countries have expressed interest in joining the forum, according to 2023 summit in South Africa.
They view BRICS as an alternative to global bodies viewed as dominated by the traditional Western powers and hope membership will unlock benefits including development finance, and increased trade and investment.
Dissatisfaction with the global order among developing nations was exacerbated by the COVID-19 pandemic when life-saving vaccines were hoarded by the rich countries.
Current Members are Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates with approximately 35 more to come.
Most importantly, recently the Chairman of the Financial Market Committee of the Russian State Duma, Anatoly Aksakov, announced that BRICS is actively exploring the possibility of replacing the US dollar with cryptocurrency for trade.
As we all know creating a crypto currency easy for individuals to do, a group of countries could do that in a few days.
‼ There is currently no existing coin for BRICS, news and launch of this will be huge, don't fall for scams that already exist‼
Possibility
As mentioned earlier, some writers/reporters from the USA seem to deny that this will happen anytime soon, or even at all. Yet this is a decision that will be made by other countries, relying mostly on just how much they want this to happen, and it is already happening.
Countries have already begun shifting away from USD trade, Saudi Arabia and China have begun talks to settle Chinese oil sales with the yuan, Brazil and China have announced the phase-in of a yuan clearing arrangement for some trade between the two countries while China and Russia are also now doing a significant portion of their trade in yuan. China's yuan now accounts for a record but still small 7% of trading volume, while the euro's slice has shrunk 8 percentage points over the last decade of ultra low interest rates to 31%.
In 2022 #CentralBanks bought over 1000 metric tons of gold, the highest amount since record keeping began around 1960. This can be indicative of simple diversification of their reserves, but seeing as the countries that bought most of the gold are Russia, India and China, being part of BRICS, the possibility of it being within one of BRICS goals (de-dollarisation), is highly likely. Pushing the holdings of gold reserves from 11% to 15%, as reserves data is confidential from country to country, we can only take this at face value and remember that actual amounts can vary. (let's just say we all have trust issues and don't expect any country's government to actually give us factual data, especially when it's beneficial for them not to). The data available to the global public however doesn't correlate. The IMF however has reported in 2021: "The share of US dollar reserves held by central banks fell to 59 percent—its lowest level in 25 years—during the fourth quarter of 2020". Media Outlet Firstpost cited in June 09, 2023, that USD reserves were down to 58%, a 20 year low. Statista's Data shows a 57-54.22% drop from Q1-2020 to Q4-2023.
One thing for sure is all outlets that offer data, do show a decline in USD reserves, albeit relatively small. But coming actions from the BRICS alliance could speed things up rapidly, an alternate Currency.
Main Factor: Currency
Russian Rambler Finance cited Prof Konstantin Egorov. He states that for Russia to only do international trade in Chinese RMB would not beneficial, unless everyone agrees to it at the same time, but even then, they would replace one Country's currency with another, this would not fix the problem, only shift it in a different direction. This is where BRICS comes in again. They announced in the Chinese summit in 2022 the proposal for a shared currency, and recently announced that decentralised crypto will be likely, and when it does happen, the shift away from the USD could be universal and fast.
‼ There is currently no existing coin for BRICS, news and launch of this will be huge, don't fall for scams that already exist‼
How does this affect me?
This is ultimately the same as fortune telling, but there are some things that are obvious, such as the sky will still be blue tomorrow, birds will still fly, the world will still turn and trades will still be made. However here are some, but not all, key impact this will most likely have.
Positive Impact
True independence: (something America has been fighting for ever since the Constitution) For every country on earth.
Improved Trade Competitiveness: A weaker dollar can make US exports cheaper on the international market, potentially boosting US exports and manufacturing.
Less Vulnerability to External Shocks: De-dollarisation could make the US economy less vulnerable to fluctuations in foreign exchange markets and financial crises originating elsewhere.
Increased Focus on Domestic Economy: With less reliance on the "exorbitant privilege" of the dollar (borrowing cheaply due to its reserve currency status), the US might be forced to focus more on strengthening its domestic economy through policies that promote competitiveness and long-term growth.
Sanctions: Countries that act against the interest of peace could still be sanctioned and completely cut off from any trades whatsoever if a shared currency is used, as the USD is in use now, the USD can not be "closed" or stopped as people still need to use the USD to buy groceries. Ultimately this will depend on how the currency is enacted and utilised.
#Binance trading opportunities: Getting our hands on a new currency that we know will have utilisation, imagine getting your hands on a brand new Global exchange crypto currency at an early stage😍
Negative Impact
If the dollar were to lose its status at the top of the currency heap, the effects on the U.S. economy would likely be dramatic.
Higher Borrowing Costs: The US government and businesses rely heavily on issuing dollar-denominated debt. If the dollar weakens due to de-dollarization, borrowing costs could rise, making it more expensive for the US to finance its debt.
Reduced Influence: The US dollar's dominance gives the US significant economic and political leverage. De-dollarization could lead to a decline in this influence, potentially affecting US foreign policy and global trade negotiations.
Lower Investment: Foreign investors might be less attracted to US assets if they see the dollar as less stable. This could lead to lower investment in the US economy, potentially impacting stock market performance and economic growth.
Sanctions: The USA or any one country will have influence on any country, instead each country would have to agree on sanctions to be made or not.
Notes on the Topic
Many Articles list none, to one, benefit to de-dollarisation.
Most articles and resources tend to use euphemisms to downplay the situation, many investments in USD halve in value overnight, this is serious.
Some articles infer that countries don't want the US to be more superior than other countries. (American writers with motive, easily spotted, yes I'm calling you all writers because reporters stay neutral😉)
It is unsure how trading pairs on crypto trading platforms will change, response from platforms needed.
‼ There is currently no existing coin for BRICS, news and launch of this will be huge, don't fall for scams that already exist‼
Sources
📚 Bloomberg, De-Dollarization Is Happening at a ‘Stunning’ Pace, Jen Says, Matthew Burgess, April 18, 2023
📚 Bloomberg, What De-Dollarization? The Dollar Rules the World, Tyler Cowan, April 13, 2023
📚 CoinDesk, BRICS Will Create Payment System Based on Digital Currencies and Blockchain: Report, Amitoj Singh, March 5, 2024,
📚 Cointribune, De-dollarization: A great danger is looming over the BRICS!, Luc Jose A., March 08, 2024
📚 Firstpost, ISTVantage, Palki Sharma, June 09, 2023
📚 Investopedia, What Is Dollarization, Reen Heakal, October 12, 2023
📚 Investopedia, De-Dollarization: What Is It, and Is It Happening?, Michael Bromberg, August 16, 2023
📚 Investopedia, What Are Deficits? Definition, Types, Risks, and Benefits, Carla Tardi, October 09, 2023
📚 JPMorgan, De-dollarization: Is the US dollar losing its dominance?, Carla Tardi, August 31, 2023
📚 Rambler Finance, Что такое дедолларизация. Объясняем простыми словами, Секрет Фирмы, September 07, 2021
📚 Resecurity, How BRICS Got "Rug Pulled" – Crypto Counterfeiting Is On The Rise, CYBER CRIME INTELLIGENCE, February 19, 2024
📚 Reuters, JPMorgan flags some signs of emerging de-dollarisation, Marc Jones, June 5, 2023
📚 Reuters, S&P Global's top economist sees dollar dominance diminishing, Reuters, July 11, 2023
📚 The Business Standard, Backlash against weaponised dollar is growing across the world, Michelle Jamrisko and Ruth Carson, June 04, 2023
