The long-rumored BRICS payment system may finally be moving toward reality. A payment rail built on interoperable central bank digital currencies (CBDCs) has appeared on the agenda for the group’s summit to be held in India this summer, more than a decade after the idea was first floated.
Attention has shifted away from a proposed BRICS currency, to be called the Unit, which was bruited about last year. Logistical challenges and concerns that China’s yuan would dominate any shared currency have sidelined that concept for now, in favor of developing alternative payment rail to rival the Europe-based Swift network.
The approach under discussion would revive the BRICS Cross-Border Payments Initiative (BCBPI) concept, first proposed in 2015. Rather than creating a new currency, the system would link existing national CBDCs such as India’s digital rupee, China’s digital yuan, and Russia’s digital ruble. Russia has been banned from using Swift since launching its war on Ukraine in 2022.
Seeking Technical Solutions
As a founding member of BRICS and host of the upcoming summit, India is playing a central role in shaping the initiative’s direction. Home to the successful payment system Unified Payments Interface (UPI), India has consistently favored interoperable payment rails over currency integration.
The latest proposal relies on two technical mechanisms to simplify cross-border settlement: settlement cycles and foreign-exchange swap lines. Settlement cycles would allow countries to net trade flows over time rather than setline each transaction instantly, transferring only the final balance. Forex swap lines would enable central banks to temporarily exchange currencies if a country needs additional liquidity in a specific currency to settle its obligations.
A Mishmosh of Economies
The BRICS group—originally Brazil, Russia, India, China, and South Africa—now also includes Egypt, the United Arab Emirates, Indonesia, and others. Collectively, its members account for roughly 45% of the world’s population and about 35% of global GDP.
One of the system’s key challenges, however, is the limited economic commonality among its members.
“There isn’t really all that much trade between this group of countries,” said Hugh Thomas, Lead Analyst, Commercial & Enterprise at Javelin Strategy & Research. “My expectation is that they will continue to build spot solutions where they can find common cause on use cases and a willing audience, but business’s need for transparent systems in countries with independent regulators and a clear rule of law will keep most big flows on Swift.”