The Rise of BRICS and Its Impact on Global Monetary Systems

Introduction

The international financial systems have for a long time been controlled by the dominance of the United States dollar (USD). Today, the US dollar is one of the primary global reserve currencies, and it plays an important role in how global trade functions, investment decisions, and economic diplomacy. After World War II, agreements like the Bretton Woods agreement and the creation of financial institutions like the International Monetary Fund (IMF) and the World Bank helped secure the dollar's dominance in the global economy. However, in 2010, a new alliance called BRICS was created, which included Brazil, Russia, India, China, and South Africa, with hopes of changing the dollar economy order. As BRICS is growing its alliances and improving their economic power, they are actively developing an independent financial system and are in talks about creating a shared BRICS currency. These goals are a direct challenge towards the current U.S.-backed system, and it may lead to a change in current trade relations, monetary policy, and global governance.

Historical Context - Dominance of the U.S. Dollar and the Euro

In 1944, the Bretton Woods Agreement was signed to make the U.S. dollar the official global reserve currency, and it created a fixed exchange rate between the U.S. dollar and gold. This led to other world currencies getting a fixed exchange rate to the U.S. dollar, which established it as a centerpiece in post-war economic reconstruction. The creation of the IMF and the World Bank secured the U.S. as the financial leader by ensuring that international liquidity and development funding would now go through systems that were based on the dollar.

In 1999, the European Union created the euro to help serve as an alternative to the dollar, and it did gain popularity and had the potential to serve as a major reserve currency as well. However, the financial crisis of 2008 revealed structural flaws that were rooted in the Eurozone, especially in weaker economies like Greece and Portugal. According to Stiglitz (2010), the financial crisis weakened the confidence that people had in Western financial governance, and it showed the danger of heavily relying on a single currency, the euro, without managing their budgets and debts as a unified system. The euro's instability and increase in distrust in the following decade created a space for a new alternative monetary bloc to emerge.

Emergence and Objective of BRICS

In 2001, Jim O'Neill, a Goldman Sachs economist, coined the term "BRIC," but the official political and economic organizations of the member states didn't form until the late 2000s. The term BRIC included Brazil, Russia, India, and China. South Africa joined the organization in 2010, which led to the name change to "BRICS." This organization was representative of over 40% of the world's population and around 25% of the global GDP during that time, which brought it to the global stage as a new economic and political power.

The main goals of BRICS include reducing the dominance of the U.S. dollar in global systems, creating a financial system that is dependent on multiple countries instead of one, and reducing the global reliance on Western-controlled organizations like the IMF and the World Bank. According to the International Bar Association (2025), BRICS member states are creating a new payment system, such as BRICS Pay, and working on changing the current trade mechanisms to incorporate local currencies. These moves are in hopes of protecting member states from the volatility of the U.S. monetary policies and to reduce the geopolitical leverage that the U.S. has through dollar-based sanctions.

The 2024 BRICS Summit ended with the member states having a renewed focus on monetary reform and they had plans to explore the possibility of launching their own local currency. The World Economic Forum (2024) saw that several new countries were showing interest in joining BRICS, which implies that there is a growing international interest in finding alternatives to a financial order that isn't led by the U.S. These developments suggest that BRICS is taking bolder and more coordinated steps to create alternative systems. According to Trade Brains (2024), the proposed BRICS currency could be backed by a pool of natural resources, like gold and oil, so that it has real value backing the currency without depending on any fiat systems.

China's Role in BRICS' Financial Strategy

China is the largest economy within the BRICS member states, and China is one of the key components of reaching BRICS' financial goals. With China being one of the fastest-growing economies and playing a heavy role in international trade, one of China's main strategic goals has been to globalize the usage of the Chinese yuan currency. As Subacchi (2017) explains, over the last few decades, China has been working on implementing currency swap agreements with a lot of countries to allow for direct trade through the yuan currency, which has led to reduced dependence on the U.S. dollar.

Additionally, China is developing its own central bank digital currency (CBDC), the digital yuan, which has already been tested in both local and cross-border environments. The Belt and Road Initiative (BRI) has helped to further China's monetary goals by promoting loans and investments offered through the yuan currency to countries in Asia, Africa, and Latin America. By using the systems that China has set in place over the past few decades, it provided a technological and financial infrastructure that directly supports BRICS' push towards greater monetary autonomy.