News / National
BRICs payment system being tested
19 Oct 2024 at 15:54hrs | Views
A new digital payments system, BRICS Pay, debuted for live testing at this week's BRICS Business Forum at the International Trade Center in Moscow.
During the trial - on 17 and 18 October - forum attendees could access the BRICS Pay platform in a limited capacity to test out payments for purchases at stores labelled with the BRICS Pay logo.
BRICS Business Forum attendees were issued demo cards preloaded with 500 Rubles, which could be used at various locations within the World Trade Center.
The main method of payment trialled is through QR codes, which aim to connect national payment methods with commercial payment systems in BRICS+ countries. The system operates on blockchain technology and supports digital currencies or stablecoins pegged to the national currencies of member states.
The ultimate vision for the system is cross-border retail support across the BRICS+ bloc. Future plans are to examine business-to-business payments and then develop the BRICS+ UNIT—Russia's crypto proposition for the bloc.
Despite the payment system being tested, experts predict that full implementation is still years away.
The system's testing also does not mean that it has launched, nor does it mean that any of the BRICS nations have agreed to formally adopt it. However, it is a significant development on the system's journey, which has been under discussion and part of BRICS discussions for several years.
The system has been developed to allow for decentralised, 'apolitical' cross-border transactions and, ostensibly, to sidestep the global SWIFT system by providing an alternative means to make and finalise payments.
It is an evolution of the idea of establishing a common BRICS currency among participating nations—a concept that has been decisively sidelined by South Africa's National Treasury and government officials, and criticised by economists and analysts.
Even the unified digital currency has been met with uncertainty in South Africa, with finance minister Enoch Godongwana stating previously that minds are not yet made up about whether to participate.
By its own admission, the consortium behind the UNIT concede that "presently, BRICS+ is not ready to launch its own currency", but state that "the need for a reliable independent international financial and monetary system is urgent".
"The UNIT ecosystem offers BRICS+ countries a unique framework, which can fully accommodate the inter-block trade and facilitate mutual investments thus alleviating economic disbalances hindering further integration," it said.
Russia's crypto push
Russia has been proposing changes to cross-border payments conducted among BRICS countries to circumvent the global financial system for some time, as the country has been heavily penalised by Western nations for its invasion and war in Ukraine.
The country is now seeking to ‘sanctions-proof' its own economy.
The alternatives include developing a network of commercial banks that can conduct such transactions in local currencies as well as establishing direct links between central banks, according to a report prepared by the Russian Finance Ministry, the Bank of Russia and Moscow-based consultancy Yakov & Partners.
The "multicurrency system" will need to "ring-fence its participants from any external pressures such as extraterritorial sanctions," said the report, which also argued that US interests "are not always aligned with the interests of other participants" of the global financial network.
The plan also includes the creation of centres for mutual trade in commodities such as oil, natural gas, grain and gold.
The US and its allies imposed sweeping penalties on Russia after President Vladimir Putin ordered the February 2022 full-scale invasion of Ukraine.
They froze Russia's foreign assets and kicked major Russian lenders off the SWIFT financial messaging system. In response, Russia has sought to decrease its dependence on the dollar.
Still, other BRICS countries that are not facing the same complications from sanctions have continued to prioritize access to the dollar-based financial system.
Globally, 58% of international payments, excluding those within the euro area, involve the greenback, while the dollar is used in 54% of foreign trade invoices as of 2022, according to the Brookings Institution.
Among the proposals, Russia is pitching the use of distributed ledger technology (DLT) or a new multinational platform to allow settlements with tokens.
"The key advantage of utilizing DLT settlement model is the elimination of the credit risk" accompanying the conventional banking set-up, the report said.
DLT could also reduce processing times and costs because correspondent entities and compliance checks will be absent, saving BRICS countries as much as $15 billion annually if half of all cross-border transfers used such transactions, the report's authors argued.
During the trial - on 17 and 18 October - forum attendees could access the BRICS Pay platform in a limited capacity to test out payments for purchases at stores labelled with the BRICS Pay logo.
BRICS Business Forum attendees were issued demo cards preloaded with 500 Rubles, which could be used at various locations within the World Trade Center.
The main method of payment trialled is through QR codes, which aim to connect national payment methods with commercial payment systems in BRICS+ countries. The system operates on blockchain technology and supports digital currencies or stablecoins pegged to the national currencies of member states.
The ultimate vision for the system is cross-border retail support across the BRICS+ bloc. Future plans are to examine business-to-business payments and then develop the BRICS+ UNIT—Russia's crypto proposition for the bloc.
Despite the payment system being tested, experts predict that full implementation is still years away.
The system's testing also does not mean that it has launched, nor does it mean that any of the BRICS nations have agreed to formally adopt it. However, it is a significant development on the system's journey, which has been under discussion and part of BRICS discussions for several years.
The system has been developed to allow for decentralised, 'apolitical' cross-border transactions and, ostensibly, to sidestep the global SWIFT system by providing an alternative means to make and finalise payments.
It is an evolution of the idea of establishing a common BRICS currency among participating nations—a concept that has been decisively sidelined by South Africa's National Treasury and government officials, and criticised by economists and analysts.
Even the unified digital currency has been met with uncertainty in South Africa, with finance minister Enoch Godongwana stating previously that minds are not yet made up about whether to participate.
By its own admission, the consortium behind the UNIT concede that "presently, BRICS+ is not ready to launch its own currency", but state that "the need for a reliable independent international financial and monetary system is urgent".
"The UNIT ecosystem offers BRICS+ countries a unique framework, which can fully accommodate the inter-block trade and facilitate mutual investments thus alleviating economic disbalances hindering further integration," it said.
Russia has been proposing changes to cross-border payments conducted among BRICS countries to circumvent the global financial system for some time, as the country has been heavily penalised by Western nations for its invasion and war in Ukraine.
The country is now seeking to ‘sanctions-proof' its own economy.
The alternatives include developing a network of commercial banks that can conduct such transactions in local currencies as well as establishing direct links between central banks, according to a report prepared by the Russian Finance Ministry, the Bank of Russia and Moscow-based consultancy Yakov & Partners.
The "multicurrency system" will need to "ring-fence its participants from any external pressures such as extraterritorial sanctions," said the report, which also argued that US interests "are not always aligned with the interests of other participants" of the global financial network.
The plan also includes the creation of centres for mutual trade in commodities such as oil, natural gas, grain and gold.
The US and its allies imposed sweeping penalties on Russia after President Vladimir Putin ordered the February 2022 full-scale invasion of Ukraine.
They froze Russia's foreign assets and kicked major Russian lenders off the SWIFT financial messaging system. In response, Russia has sought to decrease its dependence on the dollar.
Still, other BRICS countries that are not facing the same complications from sanctions have continued to prioritize access to the dollar-based financial system.
Globally, 58% of international payments, excluding those within the euro area, involve the greenback, while the dollar is used in 54% of foreign trade invoices as of 2022, according to the Brookings Institution.
Among the proposals, Russia is pitching the use of distributed ledger technology (DLT) or a new multinational platform to allow settlements with tokens.
"The key advantage of utilizing DLT settlement model is the elimination of the credit risk" accompanying the conventional banking set-up, the report said.
DLT could also reduce processing times and costs because correspondent entities and compliance checks will be absent, saving BRICS countries as much as $15 billion annually if half of all cross-border transfers used such transactions, the report's authors argued.
Source - with Bloomberg