Recent developments in the global financial landscape have captured the attention of the finance world, promising a new era of integration, transformation, and collaboration. Amidst the excitement, however, it is essential to acknowledge the formidable obstacles that stand in the way of realizing these ambitions. The 2023 BRICS Summit, slated to convene amidst this shifting landscape, is poised to be a significant juncture that could have profound implications for the future of international finance.
The resurgence of Bitcoin, marked by an impressive, if smaller, year-to-date price surge, has underscored its enduring relevance. Similar concerns surround the exploration of central bank digital currencies (CBDCs). The UK's digital pound initiative, while forward-looking, raises questions about stability, security, and privacy and potential economic power imbalances.
The notion of a BRICS digital currency, potentially extended to include several countries, reflects a desire to challenge the dominance of existing global currencies. However, this endeavor is fraught with geopolitical complexities, economic disparities, and technical challenges. Overcoming political rivalries and establishing trust among participating nations will be critical for such a currency to succeed.
Cryptocurrencies, like Bitcoin, emerged in response to regulatory failures that led to the 2008 financial crisis. We argue that the social and monetary functionalities of cryptocurrency are superior to traditional paper money. The creation of BRICS was a direct result of the crisis and was propelled by visible cracks in the stability of the global financial system. The formation was also driven by the theft of US dollar reserves by unethical US-based financial institutions and rating agencies. The first meeting of BRIC leaders, held in 2008, highlighted the need for alternatives in global finance and was, ultimately, the result of negligent, ineffective financial regulation.
