The 18th edition of the BRICS Summit in New Delhi marks a pragmatic stage in their financial approach. The members have not been looking at adopting a single currency for BRICS countries but are focusing on ‘interoperable payment systems’ and ‘local currencies’ for cross-border trade.
The change is significant for volatile and risk-averse developing markets. The model is not an outright dollar subordinator, but a settlement alternative provider.
BRICS Pay Moves Toward Practical Infrastructure
BRICS Pay is “a decentralized payment messaging ecosystem to integrate and use the existing domestic payment systems rather than develop a full-fledged financial institution that undermines the independence of the respective countries.”
The model could be interoperable with systems like the UPI in India, Pix in Brazil, CIPS in China and SPFS in Russia in terms of their common standards. Handles transactions with reduced number of intermediaries and faster transactions through the reduction of intermediaries due to interoperability.
Local Currencies Could Cut Trade Friction
There may be fewer unnecessary conversions with local currency settlements. An alternative is bilateral, thereby facilitating direct settlement, rather than transiting through dollars to another national currency.
A decrease in the number of conversion steps could reduce the cost and make payment flows more simple. Some savings of 1.5% to 3% are estimated on some invoices, but it will depend on the various corridors.
New Option for Global South Trade
There is more to strategic value than fees. Countries whose primary business relies on dollar clearing continue to be vulnerable to the effects of US monetary policies and geopolitical limitations.
Additional layers of resilience can be added with settlement mechanisms at the local level. There may be a greater usage of agreed national currencies in contracts in energy, agriculture and manufacturing, easing foreign exchange pressures.
SMEs Could Gain Greater Access
SMEs may be the major beneficiaries. Cross-border transactions can be discouraged if traditional international banking can impose costs of cross-border banking.
The removal of those barriers could be achieved with the development of connecting domestic instant-payment rails. The orientation to the payment through familiar national systems may facilitate regional trade, for exporters.
New Development Bank Adds Support
A new element comes from the New Development Bank, which will favor the use of local currencies in financing development. Raising local currency lending also lessens foreign exchange risks for borrowers.
This may end up alleviating vulnerability to currency fluctuations for developing countries. It also increases the avenues of financing outside of the traditional ones of the West.
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Limits of the BRICS Model
BRICS Pay has practical challenges. To ensure interoperability, regulations, technical specifications, liquidity and trust must be made compatible.
Local currencies are also frontier stock that can fluctuate, which may necessitate holding hedging instruments. The most important question is if these frameworks are reliable when they are scaled up to commercial application.
The 2026 strategy is more concerned with real-world infrastructure and less with symbolism. While BRICS does not seem to be developing a joint currency, it is establishing more channels for the credit of the Global South economies to flow without necessarily going through the dollar.
FAQs
What is BRICS Pay?
It is an initiative for a new and decentralized payment messaging system called BRICS Pay that aims at streamlining cross-border payments in the financial systems of the countries that are part of this cooperation.
What are the benefits of adopting local currencies?
Local currencies can lower situations of converting, the exposure to foreign exchange rates, and the need for correspondent banking.
Will the US dollar be replaced by the BRICS Pay?
No. It is not a displacive aspect on the dollar as that’s a choice it makes, not a displacement itself.
