The conflict in Ukraine is just the tip of the iceberg. The BRICS nations aim to restructure the international monetary order, causing tension with Washington. Gita Gopinath, the Deputy Managing Director of the IMF, acknowledged this in an article titled "Impact of Geopolitical Tensions on International Trade and the Dollar." She notes a significant shift in global economic ties not seen since the Cold War era.

Countries are reassessing their trade partners based on economic and security concerns. Foreign investments are being redirected based on geopolitical alliances. Some nations are reevaluating their heavy reliance on the dollar in transactions and international reserves, as stated by Gopinath.

Indian Foreign Minister Subrahmanyam Jaishankar concurs, stating that "US dominance, which began post-Cold War, has ended."

Despite rising geopolitical risks, the dollar remains predominant, largely due to the majority of commodity trade being conducted in dollars. However, there is a noticeable decline trend. For instance, China's holdings in US Treasury bonds decreased from 44% to 30% of its reserves between 2015 and 2023.

The Gold Standard

A significant recent development in global reserves is the increased central bank purchases of gold. Gold is viewed as a politically neutral asset that can be stored locally, shielding it from sanctions or seizures. While it serves as a hedge against inflation, its use in transactions is limited.

If fragmentation escalates, the IMF warns of a potential split in the global payment system along geopolitical lines, leading to the emergence of new payment systems with limited or no interoperability. Additionally, reserve holdings may shift to reflect new economic ties and geopolitical risks.

BRICS and Bitcoin

Gita Gopinath's analysis aligns with Bruno Martarello De Conti's views. The Brazilian professor cautions against weaponizing currency, highlighting the dysfunctional nature of the international monetary and financial system. This poses challenges not only for Russia but for the world at large.

Building alternatives to the dollar is crucial for the BRICS nations. Utilizing local currencies for bilateral trade, like Russia and China, and exploring a common currency are viable strategies. While a complex endeavor with no immediate implementation, it warrants discussion.

Establishing a new payment system is equally vital. De Conti emphasizes that the SWIFT payment system is weaponized in a similar manner.

Bitcoin, a proven solution for over 15 years, offers a decentralized and censorship-resistant currency and payment system, appealing to the BRICS. Simplifying matters with such a versatile two-in-one solution could be the way forward.