BRICS CBDCs can lead to financial multipolarity

India is preparing to host the BRICS[1] summit in 2026, and in the run-up to the meeting, the Reserve Bank of India (RBI) has put out a proposal to link the digital currencies of the BRICS nations. This will cover the expanded BRICS, now comprising the original Brazil, Russia, India, China, South Africa along with newcomers Indonesia, Egypt, Ethiopia, Iran and the United Arab Emirates.

The timing of the RBI proposal is intriguing. It is clearly a move towards autonomy for the emerging and developing BRICS member states – and certainly not a knee-jerk reaction to the turbulent trade talks with the U.S.

What does the proposal mean, and what does it intend to do?

Central Bank Digital Currency (CBDC) is a country’s sovereign currency in digital form. It is not cryptocurrency and not prone to volatility risks. The CBDC is issued by the central bank of the country, like the RBI in India, and considered legal tender money.  It only differs from fiat currency in that this is digital and not printed, offering the convenience of digital payments with the stability of cash.

The move to link digital currencies is a bold step towards removing a third currency, typically the U.S. dollar (USD), from the payment settlement system for international trade between BRICS nations. For instance, when importing crude oil from Russia, instead of first converting Indian rupees (INR) to USD and then into Russian rubles or Chinese yuan, trade can be settled directly through the linked CBDCs. Similarly, the export of petroleum products by India to Brazil would be settled through the linked CBDCs instead of USD.

Currently, the proposal has only been mentioned as a part of the agenda for the BRICS summit, and the details of the plan have not been made available. However, it is likely to draw inspiration from similar projects that have been initiated in the past. In 2021, Thailand, the UAE, China and Hong Kong collaborated to launch Project mBridge, with Saudi Arabia joining in later as a full member. It aimed to explore a shared multi-CBDC platform to enable cross-border payments and settlements to move with speed, efficiency and at lower cost. It reached the minimum viability product stage in 2024 and continues to expand.[2]

Similarly, Project Aber explored the possibility of a single dual-issued digital currency between Saudi Arabia and the UAE.[3] Australia, Malaysia, Singapore and South Africa developed prototypes for a shared platform for international settlement using CBDCs under Project Dunbar.[4] There have also been other negotiations and trials for digital currency-based cross-border settlement.[5] However, these initiatives are not yet operational at the required scale to produce enough evidence in favour of, or against, RBI’s proposal, which aims to be much larger in scope and membership.

Given that BRICS member states have been toying with the idea of an alternate unified digital currency for payment and settlement, this proposal could serve as a call for unification, collaboration and execution.

A CBDC-linked system of payment settlement will promote trade between BRICS nations via a common mechanism without having a separate BRICS currency.[6] With BRICS members contributing $5.61 trillion to exports and $4 trillion[7] to imports and accounting for 40% of the global economy in 2024,[8] it is reasonable that they develop payment systems beneficial to them collectively yet allows member nations to operate independently. Geopolitically it reduces risk by skirting the SWIFT payment settlement systems and specifically, domestic. MSMEs will benefit from low banking and conversion costs.

In 2024, India’s BRICS imports were over 40% of its total imports, with crude oil imports from Russia being a major contributor. Exports to BRICS nations accounted for about 22% of total exports.[9] If this proposal can reduce foreign exchange fluctuation risks and costs for these large trade volumes, it will be beneficial for Indian traders who can use this working capital elsewhere. Additionally, it may open up new markets and opportunities among BRICS nations owing to the ease of doing business.

Some might view the proposal as anti-American and a move towards proximity to Eastern powers (specifically Russia and China), but this is a narrow perspective. India is not yet equipped to operate without having the U.S. as a significant trading partner. U.S. sanctions and recent diplomatic developments between the two countries have seen instability, but in February, the trade deal with the U.S. was finally negotiated and will be ratified.  This is not in opposition with India’s continuing endeavours on currency and economic resilience.

For some time now, India has been working on the wider acceptance of the Rupee as an international currency of trade. In 2022, India introduced the special Rupee-Vostro account, which allowed settlement of international trade in INR. This was an additional, complementary arrangement to the existing system that uses freely convertible currencies aimed at reducing exchange rate risk for Indian exporters and importers. India’s allowance of international trade in INR is also a step towards reducing dependence on the USD.

At present, the majority of the trade between India and Russia takes place in local currencies.[10] Even administrative steps like cutting approval time for foreign banks to open Rupee accounts being reduced to 24 hours – strategic moves towards making INR a favourable currency for settling international trade.

Thus, the RBI’s proposal seems to be a sequenced step that allows not only India but all other BRICS members to operate on an ‘in-house’ settlement system that saves costs and boosts trade. As a bonus, the members that have already attempted such initiatives can bring their learnings to create synergy and positive outcomes.

Is achieving this is mission impossible? No. Will this be a smooth ride to its destination? Definitely not.

To begin with, not all BRICS nations have an operational digital currency. China, Russia and India do and are expanding its use; Brazil, South Africa and the UAE are testing and preparing to launch their own CBDCs, while other member states are at various stages of this journey.[11]

Secomd, a linked system will have interoperability issues. Each country has its own regulations and will want to maintain financial sovereignty. An initiative of this nature will have to navigate a fragmented regulatory environment while ensuring financial stability on the domestic front. It is necessary to put in place stringent laws related to data-sharing and strong cybersecurity measure due to lack of technological standardisation. A strong dispute resolution mechanism and anti-money laundering regulations are critical components to ensure that the system is not misused. The stability of political regimes too will play a part in defining the viability of the proposal.

Finally, a functional mechanism to manage trade imbalances is crucial to avoid unnecessary accumulation of reserves.

The West may view the proposal to link the digital currencies of the BRICS as a skirt-around to sanctions and other global financial restrictions. For the rest of the world, it is a step towards the gradual streamlining of the foreign exchange market. If successfully implemented, this will be a significant geo-economic shift and an ambitious step towards autonomous international trade, at least for trade between BRICS. It will also position India and the BRICS as global digital finance leaders. It won’t replace current systems in the near future but can gradually gain traction and bear fruit. Thereby, BRICS is not just asking for a seat at the table – its creating its own table.