Around 120 foreign nations participated in the recent International Municipal Forum of BRICS countries. Shortly after, the 9th Annual Meeting of the New Development Bank was held, where the bank’s President, Dilma Rousseff, highlighted efforts toward promoting the use of local currencies to reduce dependency on the US dollar.
So, the question arises – How does this impact Bitcoin?
Rousseff mentioned,
“One of the key focuses of the NDB is to enhance the use of local currencies. We have decided that up to 30 per cent of the bank’s total funding will be conducted in local currencies.”
A Global Initiative?
BRICS has been at the forefront of advocating for de-dollarization in recent years. During the 15th Annual Summit of BRICS nations last year, there was considerable support for a unified “BRICS currency.” Brazil’s President Lula Da Silva emphasized,
“It increases our payment options and decreases our vulnerabilities.”
It’s important to note that the global shift away from the dollar is gradual. Despite China’s efforts to reduce its reliance on the USD, the US dollar still dominates global forex reserves with 58% share, as per the Atlantic Council’s Dollar Dominance Monitor, and accounts for 88% of all foreign exchange transactions.
While de-dollarization is unlikely in the short or medium term, long-term prospects exist. The USD’s share of global reserves has dropped from 65.3% to 58.8% in the past 8 years. Furthermore, countries, particularly those linked with BRICS, have been accumulating gold amid rising prices.
Since 2019, gold has regained its status as a reserve and store of value, notably due to the COVID-19 crisis. This renewed interest has extended to other asset classes with store of value characteristics, including Bitcoin and cryptocurrencies.
Bitcoin’s Role in the Scenario
Countries like Russia and Iran are already leveraging Bitcoin and Bitcoin mining to counter the impact of international sanctions. Russia is also exploring cryptocurrency exchanges for cross-border transactions.
Within BRICS, there are discussions about launching a gold-backed stablecoin following earlier talks about a unified currency. Similarly, several nations are eyeing El Salvador’s move of accumulating Bitcoin as a treasury asset to untether themselves from the dollar, despite objections from the World Bank and IMF.
With entities like MicroStrategy and Metaplanet entering the cryptocurrency space, and the increasing popularity of Bitcoin and Ethereum ETFs on Wall Street, institutional interest in cryptocurrencies is evident.
These collective developments suggest a promising future for crypto. If BRICS nations succeed in their de-dollarization efforts and even a fraction of USD liquidity flows into cryptocurrencies, the market dynamics could witness a significant shift.