Are Russia and the BRICS Still Interested in Bypassing the US Dollar?

If you are going to try and cover the potential for monetary system change like we do here, one aspect you have to mention is the ongoing effort by a number of nations to construct some kind of system that can bypass the US dollar. 

We have covered that quite a bit here and have noted that both Russia and China have made it pretty clear in public statements that they would like to find ways around the US dollar dominated monetary system since it provides the US with a lot of leverage globally. 

This article appearing in Russia Today back in late 2017 provides more evidence that this effort continues even though it clearly moves very slowly. Very recently Russian President Putin said that Russia "is not rejecting the dollar" but added that with the US imposing sanctions on Russia, it must take actions to minimize risks associated with holding US dollars. He also said that the US "undermines trust in the dollar as the reserve currency" by imposing restrictions on settlements in dollars. He went on to say that US actions prompt "dozens of countries to consider other options".


Below are some excerpts from the RT article from last year and then just a few added comments. I added the underline for emphasis.

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"An initiative to create a joint digital currency for BRICS countries and the Eurasian Economic Union (EEU) has been proposed by the Central Bank of Russia, according to its First Deputy Governor Olga Skorobogatova.

She said the issue of a common cryptocurrency for a number of countries is very promising, more than that for a single nation.

“The participants of different economic events where I usually take part… all come to the conclusion the issue of a virtual currency is not needed much by one country. First of all, it makes sense to discuss the cryptocurrency on the level of several countries such as BRICS and EEU. It makes sense to set one equivalent for all payments,”Skorobogatova said at a Russian finance ministry meeting."

. . . . .

“The introduction of a national digital currency seems to us not entirely justified from the point of view of macroeconomics, population...” said Skorobogatova.

. . . . . 

"In September, the chief of the Russian Direct Investment Fund (RDIF) Kirill Dmitriev said the BRICS finance committee was discussing a joint virtual currency for the five-nation bloc of developing economies of Brazil, Russia, India, China and South Africa."

Click here to read the full article in Russia Today

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My added comments: I underlined some parts of the quotes above to emphasize the lack of enthusiasm expressed by the Russian Central Bank for a "national digital currency".  This is something we have covered here pretty extensively because so many central banks around the world have talked about the idea of a national central bank digital currency (CBDC) and yet there has been no movement so far by major central banks in that direction. This is consistent with what we have reported here for some time. 

It seems like that the idea of some kind of national central bank digital currency has attracted interest and media attention, but when people look at trying to put national fiat currencies on a blockchain platform in a real world monetary system (that must be able to quickly process thousands of transactions), reality takes over and we don't hear much more about it. One notable exception is the news last fall from IBM, KlickEx, and Stellar that they would implement what KlickEx CEO Robert Bell described as "the first institutional scale implementation of blockchain".

Along those lines, I see articles constantly predicting that either Russia or China is on the verge of launching their own national digital currency any time now. But look again at the comments above from the Russian Central bank in a Russian based news publication. They don't see any reason for one national central bank digital currency. More and more central banks have made similar comments. In this case Russia is floating the idea of a common digital currency on a regional basis, but offers no time frame for when we might see this. The article cited above was first published in December 2017. It is August 2018 with no signs of the regional virtual currency mentioned in the article at this time.

So, while we should monitor this space in terms of its potential to impact the global monetary system, there is no indication at this time that blockchain based digital currencies (either national or regional) are on the near term horizon. The same situation for the IMF. They have talked about a digital version of the SDR (as we have reported here). But I have no information that the technology to implement such a thing using blockchain exists at this time. Beyond that, the IMF has not indicated they have much enthusiasm for expanding the role of the SDR in recent public statements on that topic.

While I can't rule that out some day, I have no indication at this time that anything like that is ready to go. It can't happen without the technology to do it being in place and having been thoroughly tested in the  real world. The only large scale real world type test involving mainstream financial institutions using blockchain for payments that I am aware so far is the one noted above from IBM, KlickEx and Stellar .

Added note: Coming up over the next couple of weeks are two interesting articles. First, Dr. Judy Shelton comments on the potential for monetary system reform arising out of the current world debate on free and fair trade. After that, Robert Bell of KlickEx gives us his take on where he sees the monetary system going based on his real world experience working with the latest innovations in fintech.