The financial world is discussing the potential for BRICS countries’ digital currencies to replace the petrodollar. While this form of BRICS national currency remains conceptual and nonexistent, it is envisioned as a central bank digital currency (CBDC) rather than a cryptocurrency based on blockchain.
This currency is believed to resemble China’s digital yuan or the digital dollar currently under consideration by the Federal Reserve, rather than being a digital euro that emerged with the establishment of the European Central Bank following the creation of the euro in several EU countries in 1999, contrary to expectations. The digital currency, for BRICS countries, was not initially intended to replace their national currencies.
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The purpose of this joint currency is to challenge the US dollar’s status as the world’s reserve currency, rather than replacing the member countries’ national currencies.
For decades, the dollar has been the primary global currency, especially since the dissolution of the Soviet Union. The dollar is often referred to as the “petrodollar” and remains the main currency in the global oil market.
However, with China’s increasing influence, the US no longer holds undisputed global dominance, and the dollar’s position as the dominant currency in the global oil market is being challenged. Particularly, China is seeking to create an alternative global oil market that does not rely on the dollar.
Several years ago, China introduced the digital yuan as part of this strategy, although it has not yet replaced the petrodollar globally.
As discussions progress regarding BRICS digital currencies, the focus remains on whether they can effectively challenge the dollar’s dominant position in global markets, especially in the oil sector. The success and impact of such currencies will depend on various economic and geopolitical factors.
