International Journal of

Financial Studies

Article
Digital Money Options for the BRICS
Mikhail Vyacheslavovich Zharikov

World Finance Department, Financial University under the Government of the Russian Federation,
125167 Moscow, Russia; mvzharikov@fa.ru

Abstract: The article is time relevant, since a number of countries, such as China and Russia, started
pilot testing their digital currencies in 2020, due to the necessity of contactless means of payment
during the coronavirus pandemic. The purpose of this research is to revisit the phenomenon of
the virtual money. What is new here is that this is one of the first papers concentrated on a digital
currency for a group of countries. The article offers an econometric representation of how the BRICS
(Brazil, Russia, India, China and South Africa) currency may be utilized when hypothetically coined
on a crypto-exchange of the BRICS monetary union. This research contains data condensed in a
table and graphical form. The major idea of this article is that only a digital unit of account for a
group of countries such as the BRICS, unlike a cryptocurrency, may help create a sustainable financial
stability environment and solid monetary infrastructure. The author conducts a detailed analysis
of a digital currency compared to a cryptocurrency. The hypothesis is that a shared digital currency
for the BRICS may promote financial risk diversification through a risk-sharing mechanism. The
author’s results include a formula that may provide a way of calculating the quantity of the BRICS’
digital currency, as well as a simulated representation of a would-be BRICS currency’s dynamics.
The practical significance of this paper is that the proposed BRICS digital currency can find its use
in investment portfolios as an asset. This asset may provide stable returns and benefit from the
growth prospects of the BRICS economies as ones of the most rapidly developing markets in the
world. Potential investors in the currency of the union may profit from the abundance of natural
resources of Brazil, Russia, and South Africa in terms of energy and other minerals offered at the
best world market prices, as well as the technology, labor, and durable goods of India and China
priced at competitive valuations. The assets expressed in the BRICS currency have the potential
of growing over the years, so a dollar invested today may turn an enormous return on investment
Citation: Zharikov, Mikhail within this decade, unlike stagnant markets in Europe, Japan, and the US. The author proves that
Vyacheslavovich. 2023. Digital a cryptocurrency cannot serve a shared currency function for the BRICS, and it stresses the very
Money Options for the BRICS. significance of circulating the shared digital currency in particular. Finally, the author simulates the
International Journal of Financial dynamics of the BRICS’ digital currency and proposes an approach to calculating its exchange rate
Studies 11: 42. https://doi.org/
relative to some of the leading currencies in the international monetary system.
10.3390/ijfs11010042

Academic Editor: Zied Ftiti Keywords: digital currency; cryptocurrency; shared money; financial innovation and engineering;
shared monetary policy; digitization
Received: 19 January 2023
Revised: 26 February 2023
JEL Classification: F15
Accepted: 28 February 2023
Published: 2 March 2023

1. Introduction
Copyright: © 2023 by the author. The phenomenon of the BRICS has gone through a series of consecutive stages, which
Licensee MDPI, Basel, Switzerland. finally led to what we know it as today. The group was conceived as an investment project
This article is an open access article
by Goldman Sachs in 2001. At that time, Goldman Sachs recommended that fund managers,
distributed under the terms and
asset managers, and other interested parties take a special look at the corporate assets and
conditions of the Creative Commons
shares from the four emerging nations included in the BRIC, as it was known at the time,
Attribution (CC BY) license (https://
as a combination of the four countries of Brazil, Russia, India, and China. Investment in
creativecommons.org/licenses/by/
the BRICs was supposed to lay the foundation for a new, better, and more prosperous
4.0/).

Int. J. Financial Stud. 2023, 11, 42. https://doi.org/10.3390/ijfs11010042 https://www.mdpi.com/journal/ijfs

Int. J. Financial Stud. 2023, 11, 42 2 of 17

world after 9/11 in the US and, later, after the global financial crisis of 2007–9. The BRICs
provided hope for the world economy as drivers of GDP (Gross Domestic Product) growth
and as a crucial part of global value-added chains.
The four countries greatly contributed to recovering global GDP after the dot-com
bust of 2000–2001 and the sub-prime mortgage crisis a few years later. The four countries
also helped both developing and developed nations obtain access to cheaper, competitive
goods offered by the BRICs, because the four produced them with lower costs and decent
quality. The markets of the BRICs were booming in the early 2000s. The boom drove up
share prices of the BRICs corporations. Consequently, Goldman Sachs believed they were
the next big thing in the world of finance. In fact, it strongly supported the idea that the
four countries would overtake the combined GDP of G7 countries by 2050. The group
was so successful that the bank had to revise its prognosis several times in the process,
saying that it might actually happen a decade and a half earlier. In 2009, the leader of the
BRICs first met at a summit in Russia. It was at this time that the BRICs started to see
themselves as something more material in terms of politics and economic policy. Thus,
out of an investment portfolio concept, the BRICs quickly transformed into an influential
emerging market combination of countries that could have a say in global economic issues.
In 2010, it became even more clear that the BRICs were determined to be a global economic
driver and global reformer, when it added South Africa and became the BRICS, as we know
it as today.
The BRICS started to claim more economic and political say in global issues. For
example, the BRICS strongly supported the idea of international financial system reform
after the global economy nearly collapsed due to the global financial crisis. The commodity
boom of the early 2000s and its resurgence in early 2010s benefitted the BRICS, especially
commodity-rich Brazil, Russia, and South Africa. China became part of the World Trade
Organization and, by 2009, became the largest world exporter by merchandise. India
became a global IT hub for the rest of the world. Thus, the assets and the currencies of the
BRICS were quite interesting for foreign investors, even after Goldman Sachs reclaimed
taking any part in the continuation of the BRICS dream as some kind of savior of the
existing world economic order.
Economic success led the BRICS to strongly believe in their destiny as a new world
economic center. The group started seriously thinking of internationalizing their currencies
and replacing a certain share of the US dollar reserves in national currencies to diver-
sify foreign exchange risks. The US Federal Reserve’s monetary tightening of 2013–2014
strengthened the dollar, raised capital costs, and reined in support for the existing world
economic order and international monetary system, leaving it almost unchanged and un-
challenged with the US as the ultimate leader. Despite a series of crises during the first two
decades of the 21st century, the BRICS continued to be a sort of a global economic driver.
However, we must admit that the BRICS tried to pursue both an economic and
political agenda, especially after the US started a trade war against China. Meanwhile,
Russia met waves of economic and financial sanctions due to conflict in Ukraine and
was as good as isolated from the rest of the world. Brazil was struggling to keep its
democratic face during the government of a populist president Jair Bolsonaro. India also
suffered reputational losses after the conservative Bharatiya Janata Party came to power
with Prime Minister Narendra Modi at its helm. South Africa struggled greatly under the
yoke of corruption and social unrest. The coronavirus crisis, as well as global financial and
economic turbulence increased pressure on the BRICS, thus making them more divided as
an entity of countries. The BRICS were never a common union. However, it was at this
point when each member state had to look more to internal affairs than at more intra-group
cooperation and development, due to many homegrown difficulties and strains.
Nevertheless, the BRICS did not come apart. They are still a very interesting economic,
political, and social phenomenon that deserves research; especially today, the phenomenon
really needs revisiting in terms of taking part in a new, less global world economy with
a hostile economic and political environment. Part of the revisiting process can involve
Int. J. Financial Stud. 2023, 11, 42 3 of 17

ways to conduct bilateral transactions through a sort of digital currency in an effort to

de-dollarize their foreign currency reserves and reliance on the US. It is for this reason that
this underlying research suggested a sort of digital currency project as a mechanism to
cooperate and develop towards a better, communal, more prosperous, and secure future. A
common digital currency project can be such an instrument and mechanism. Therefore, this
hypothesis is to try to lay a foundation for a probable monetary system that may involve
the BRICS and make it a sound concept or, at least, an initial discussion issue for ways of
leading to that better cooperation, economic, and environmental sustainability, as well as
technological sovereignty.
Since money is a conduit of economic activity, the hypothesis of this underlying article
is that digital money can better address the problems of people in a contemporary turbulent
world, i.e., it can create new ways and channels to help distant work in times of widespread
disease as well as provide payments for people and whole nations under lockdowns.
Digital money makes up a new seamless infrastructure to conduct cross-border transactions
between nations for goods and services to support the resistance of supply chains and of
value-added chains. Hence, the idea of this article is to lay a theoretical and methodological
foundation for a digital currency to deepen the economic, financial, trade, and monetary
integration of a group of emerging market economies—the BRICS—which produce over a
quarter of global GDP and account for more than a quarter of global economic recovery
after the coronavirus crisis and a period of turbulence in the financial markets.
Digital money today is split, however, into various types of currencies, tokens, coins,
etc. It became so ubiquitous in global finance, indeed, that the government decided to also
step in and try to regulate digital money (Alsalmi et al. 2023). A number of countries in the
world have launched initiatives or have prepared themselves to regulate digital money. A
pilot scheme came into operation in China in 2020. Russia launches its version of a digital
ruble in April 2023. Russia is in need of payment means and platforms due to international
isolation. Thus, its project may assist it in its efforts to provide financial sustainability and a
framework for exports and imports with countries that abstained from observing Western
sanction regimes. Therefore, the author proposes and simulates a model with the same
type of digital money in an effort to understand its dynamics after the launch.
A currency for a group of countries may have a name of a common currency, a shared
currency, a collective currency, and a multilateral currency. For example, the euro is a
common currency of the Eurozone nations, which are a group of the European Economic
and Monetary Union (Beetsma et al. 2016). Economists such as Janková and Dostál (2020)
contributed to talking about the Eurozone as a union of countries sharing one currency.
This is not a cryptocurrency, and it will not be one, even if a digital euro is introduced
(Johnson 2013). A shared object or system has become a sort of a cliché for everything, from
cars to the economy in general, namely car sharing, property sharing, office sharing, etc.
The idea of sharing things is about a mechanism people use to reduce the cost of living,
production, and capital. It is as if the capitalist world has suddenly recognized the benefits
of socialism, where people shared everything, including flats, land, inventory, factors of
production, household items, etc. A shared economy has come into being as something
formerly known as the economy of cooperation.
In this respect, money is also a shared good, because it is commonly used by everyone
in an economy. It is a universal good accepted by every consumer and every producer. A
shared good may also mean that it belongs to nobody in particular, such as property in
the Soviet Union, wherein everything belonged to everyone and to no one in particular.
However, in theory, a shared good can hardly sell on the market, because to sell any good
in the marketplace, it must be private and exclusive. Economies and markets start where
goods have specific owners. For example, a digital economy has not come into being yet,
because governments, businesses, and the public in general have not answered the question
as to whether data are private, exclusive goods or public goods. If they are public, they are
not sellable on the market. Therefore, it is not clear who should provide them. Money today
is still provided by state monetary authorities on behalf of governments. Hence, money is
Int. J. Financial Stud. 2023, 11, 42 4 of 17

a shared good in a market economy. It buys goods and services and other currencies on the
forex market.
Some authors, including Cohen (2012), used to say that the creation of a common
currency or a transaction unit of account for a group of countries is a very comprehensive
challenge, as well as a problem of regional economic integration and globalization, because
it erases borders, national identity, national differences, cultures, and the language of
finance. A currency, no matter if it is common or shared for a group of countries, always
entails the power decentralization of a national central bank and the sovereignty of the
state. In the Eurozone, this problem became especially acute after the world financial crisis
and the euro crisis that was a result of transformations that took place in the international
monetary system and international financial architecture since then. This idea was clearly
stated, even before the pandemic, by contributors like Boddin and Stähler (2018) who
viewed this process from the EU perspective. The world crisis (coronavirus crisis) that
started in 2020 once again showed that having an independent currency shared with no
other countries makes it easier to deal with government debt and budget deficit (Hu et al.
2020). With this in mind, Hou and Li (2019) tried to present this numerically in a form of an
indicator that could help explain the dynamics of selected assets. Hence, if countries share
a currency, they will always have to look to their peers in the union and ask for a sort of
permission to settle debt and budgetary problems (Kim 2019), such as what they actually
did during the pandemic, and we know that this took place from researchers including
Khan et al. (2020), among others. During crises, emerging economies with no reserve
currency status or freely convertible currencies tend to accumulate hard currency to sustain
growth and prosperity in emergencies (Sun et al. 2019). We saw this again during the
pandemic and can find that outcome brilliantly stated in works such as Salisu and Akanni
(2020). A few rapidly developing countries, very rich in natural resources, labor, liquidity,
capital, and credit, which they can provide to the rest of the world, generally known as the
BRICS, have recently started thinking about omitting currencies other than their own in
foreign transactions (Younsi and Bechtini 2018). They diversified their sovereign wealth
funds and foreign exchange reserves by adding assets denominated in currencies other than
the US dollar (Yu 2014). They also started developing national digital currency projects. For
example, China and Russia want to launch a digital yuan and a digital ruble, respectively
(Zou et al. 2019).
The economic crisis caused by the coronavirus pandemic in 2020 may accelerate that
trend. In the short- and mid-term, there will perhaps be a setback in the BRICS’ penta-lateral
currency use and a temporary return to the US dollar. However, in the long run, there
is an expectation that the BRICS are going to settle more foreign deals and transactions
in their local currencies after the pandemic (Agrawal et al. 2020). The trend to diversify
the foreign exchange reserves in the BRICS is likely to continue after economic activity
will have restored again. Still, the local currencies of the BRICS by themselves will hardly
challenge the US dollar or the euro, even in the super long run. A number of economists in
the past, including Galvão (2010), Johnson (2013), Kadayan (2014), and Kasekende et al.
(2010), already said that the BRICS may succeed only if they cooperate more closely in
bringing about a currency agreement that would establish a new shared multilateral unit
of transactions.
This underlying research continues the studies undertaken by previous scientists such
as (Brik et al. 2022) and supports their idea that stable digital currencies make a difference
when discussing the issues of financial stability in the markets and the sustainability of
economic growth in specific countries, especially when taking into account the plunge of
cryptocurrencies after the US Federal Reserve turned to monetary tightening in the spring
of 2022, as well as how rising interest rates have increased the value of stable currencies
and depressed the value of the crypto ones (Hou and Li 2019).
Int. J. Financial Stud. 2023, 11, 42 5 of 17

2. The Foundations of the Virtual Money Theory

The origins of virtual money are closely linked to the evolution of industry, manufactur-
ing, and production forces. By the late 1990s, the evolution resulted in deindustrialization,
which meant an increasing share of services in GDP. Money, as with all goods, also changed
considerably due to deindustrialization in the later part of the 20th and early 21st centuries
(Alemany et al. 2020). Overtime, money became dematerialized in the same way that pro-
duction processes became deindustrialized. This process helped spur the financialization
of the reproduction process and the breakaway of the virtual financial sector from the real
economy. The combination of these forces created an economy of virtual values Zhou et al.
(2018).
Theoretically, each good has value on the market according to the value of inputs
used to produce the good. However, that theory changed too, since financial services
dominate the modern world market, and their value does not truly express the cost of their
production. In the late 19th and early 20th centuries, a good’s value was meaningful for
stimulating market competition (Cao and Wang 2019). This allowed for the bankruptcy
of poorly performing enterprises, no matter how big they were. Thus, no moral hazard
occurred, and there was no too-big-to-fail dilemma. Market competition helped companies
with average-performance become high-performing ones. If they failed, they became poorly
performing companies and eventually went bankrupt and later exited the market. In the
modern economy, a firm’s efficiency has taken a different meaning (Tsai and Cheng 2019).
An efficient enterprise today is the one that has eliminated the working capital, inven-
tories, and warehouses. It does not organize a conventional production process. As some
researchers explain today, an entrepreneur takes a specific good called money to buy any
form of capital, including securities, derivatives, bonds, foreign exchange, etc., and gains
from trading them on the financial market. Thus, money itself started to produce surplus
money (Tripathi and Kaur 2020).
By the early 2000s, entrepreneurs have ultimately freed themselves not only of the
necessity to employ a workforce and keep warehouses, inventory, and the means of pro-
duction, but also of the obligation to pay wages, create amortization funds, modernize
working capital, transfer funds for budget purposes, health care, training, and education.
They do not have to pay taxes and various government charges, other than broker fees.
This has resulted in individualizing the process of capital formation and accumulation.
Thus, money as a specific good has evolved parallel to deindustrialization, dematerial-
ization, and financialization. It has increasingly taken the shape of a quasi-currency, a vir-
tual currency and, finally, a digital currency, but has continued to remain under the control
of the issuer or lender of last resort, which essentially is a central bank (Dong et al. 2019).
This tendency further led to the creation of cryptocurrencies, a phenomenon which
became part of deindustrialization, dematerialization, financialization, and a virtual econ-
omy. A principal distinction of cryptocurrencies from quasi-currencies is that the former
is a financial product. It is the product of financial engineering and does not serve a legal
tender function in an economy. There is no centralized issuer responsible for the issue
and circulation of a cryptocurrency. There is no deposit insurance for funds denominated
in cryptocurrencies, just like there is no deposit insurance for accounts used to trade fi-
nancial products, derivatives, etc. Some financial products may have a credit rating of
a certified credit rating agency. But there is no rating agency in existence to rate money
(Agrawal et al. 2020).
Cryptocurrencies are very volatile assets. For example, a daily exchange rate volatility
of the currency pair Bitcoin/US dollar (or BTC/USD) may exceed 150,000 pips or more,
which makes it impossible for any serious organization to hedge contracts expressed in
BTC. Normal currency pair volatility on a particular day is 200–1000 pips. Even on the
days of important economic and financial announcements, normal currency volatility
rarely exceeds that. For example, on 2 June 2020, upon the Australian Reserve Bank
announcement of the key interest rate, the currency pair of the Australian dollar/US dollar
(or AUD/USD), moved 256 pips within an hour. At the same time, the BTC volatility in the
Int. J. Financial Stud. 2023, 11, 42 6 of 17

currency pair BTC/USD amounted to almost 42,000 pips due to unknown reasons, and
this change happened in just a little over six and a half hours. Hence, hedging a contract
expressed in such a volatile currency will just lead to the bankruptcy of the insurer, if it
were bold enough to do that in the first place (Zou et al. 2019).
Another major aspect which proves the fact that a cryptocurrency such as BTC cannot
be used as a regular unit of money circulation is the volume of trading (Sagim and Reis
2020). For example, even on the days of the most significant economic and financial events,
data releases, central bank announcements, etc., a five-minute volume of trading a normal
currency pair is something like 500 lots, depending on the broker, and even this is a high
volume. In the above example with the currency pair AUD/USD, this averaged 250 lots.
A five-minute trading volume of the currency pair BTC/USD, on the other hand, may
sky-rocket far beyond any imaginable level. In the same instance, this volume stood
at 95,200 lots, which basically puts a currency such as BTC into the category of highly
profitable assets like gold or palladium with regular five-minute transaction volumes
of over 20,000 lots, and, even then, traders buy so much of these assets, usually during
important events or existential press releases (Salisu and Akanni 2020).
One more important fact which makes it impossible to speak of a cryptocurrency such
as BTC as a regular normal currency is the amount of fees a broker charges a client wanting
to trade in it (Fu et al. 2020). Depending on the broker, a fee to trade in the currency pair
BTC/USD may range from 4000 to 6000 USD a lot. In contrast, a brokerage fee to trade in
the currency pair AUD/USD, for example, rarely exceeds 7 or 8 USD a lot. This means
that, as a number of scientists think, only the traders who own large accounts with a broker
can trade in the currency pair BTC/USD, and these accounts are far bigger than the usual
accounts of an average trader on the market (Gao et al. 2020).
Finally, a cryptocurrency such as BTC is open to trade 24/7, even on holidays, whereas
regular currencies do this only on official working days.
Since a cryptocurrency has no links to any central monetary authority, some economists
suggest that it may be a collective, common, or shared currency for a group of countries
which cannot agree on a common central bank. However, due to the reasons described
above, it is very unlikely that a group of sovereign countries could use such a highly volatile
and speculative currency with a very unusual and strange trading regime. High volatility
and a very speculative nature are particularly damaging for trade, current accounts, savings,
investments, and many other things connected with the activities of individuals, business
enterprises, and governments that need money as legal tender, a unit of account, and a
means of transaction. A collective or a shared currency for a group of countries can be
digital, but it is certainly cannot be as volatile and speculative as cryptocurrencies, and the
foreign exchange market and the virtual financial market where cryptocurrencies circulate
should not have the authority to make individuals and companies use it as a legal tender,
because the population at large has no trust in a system which they are not able to control
and which is unaccountable to anyone. Therefore, there must be a lender of last resort to
issue a collective (or a shared) digital currency and a government authority to control it
(Wang et al. 2019).
The nationwide proliferation of a cryptocurrency that exists in short supply and
launches into circulation as regular genuine money may provoke a liquidity crisis due
to the fact that the mechanism of cryptocurrency supply works in a completely different
and unconventional manner that is incomparable to the character and scope of a national
currency. For example, BTC is short in supply due to restrictions put in place by crypto-
graphic algorithms and computing power. Its total supply is going to reach its maximum
by 2040 at 20 million units of BTC, which is hardly sufficient to satisfy the needs of the
world economy. When Irwin Fisher thought about the sufficiency of currency supply in
circulation, he understood it as an equation, which said that there must be enough money
in an economy so that 100% of the money supply in circulation purchased 100% of the
goods sold at current prices (Fisher 1907). Hence, with a global GDP of, say, 85 trillion USD,
the supply of cryptocurrency in worldwide use must amount to the quantity approximately
Int. J. Financial Stud. 2023, 11, 42 7 of 17

equal to the velocity of a unit of money in circulation multiplied by the total quantity of
the cryptocurrency in circulation. Nevertheless, it is difficult to find the components to
put to the Fisher’s Formula, since there is no authority in existence to set interest rates
and reserve requirements and, consequently, no way to determine the money multiplier.
To have these characteristics, BTC will have to serve the functions money usually does
in an economy, i.e., unit of account, means of payment, store of value, etc. Some scholars
and professionals say BTC has all those features. However, the problem is that they just
imagine that BTC wears these clothes. In fact, that does not mean that it will actually serve
those functions if introduced. People will accept BTC as money only if they recognize it by
the absolute majority as a currency one can use to pay for something, deposit with a bank
account, transact with foreign countries, etc.
Still, in a hypothetical setting, if, at the end of the day, BTC really circulated in the
world monetary system and had an institution responsible and accountable for its issue,
then, with the official reserve requirements of, say, 10%, we will construct an equation
in which the supply of the cryptocurrency multiplied by 10 equilibrates the entire world
GDP, i.e., 20 million BTC multiplied by 10 must equal 85 trillion USD multiplied by the
BTC/USD exchange rate, or 200 million BTC must equal 85 trillion USD multiplied by
0.0003 BTC, or 200 million BTC of currency supply must equal to 22,500 million BTC worth
of goods and services (Formula (1)).

20 million BTC × 10 = 85 trillion USD × BTC/USD
200 million BTC = 85 trillion USD × 0.0003 BTC , (1)
200 million BTC = 25, 500 million BTC


These simple calculations demonstrate that, by 2040, BTC will exist in an insufficient
supply to satisfy the needs of society in goods and services, even in today’s prices and at
the current BTC/USD exchange rate, and the world will need BTC in quantities at least
127.5 times as much as there is in existence, which makes it hardly realistic for use in
circulation.

3. A Methodological Approach to Creating a BRICS Digital Currency

Thus, cryptocurrency is not a choice for either a monetary union such as the Eurozone,
or an informal group of countries such as the BRICS. What they still can share is a digital
virtual currency that is used as transactions tender. The creation of digital money starts
with the name. The basic principle to choose a name for a shared digital currency for a
group of countries is that there must be absolutely no indication in it to its national origin
or reference for history, culture, and specific features referring to civilizations. So, name
choices and acronyms for a digital unit of account for the BRICS may be as follows: the
BRICS currency, such as the existing acronym; 5R—Five-R [faiv9]—a name constructed from
the initial letters from their international currency codes (Brazilian Reais—BRL, Russian
Ruble—RUR, Indian Rupee—INR, Chinese Renminbi—RMB, South African Rand—ZAR);
and Pentagral—a name created to account for the number of member countries of the
group. A sign for it may be a star or a pentagram. The [-l] in the name instead of [-m]
sounds better to think of a digital currency for the BRICS as an integral body and a sort of
a unity.
The research already speculated above about the quantity of money needed to circulate
a shared currency in the globe. If the BRICS currency goes global in the end, the formula
to calculate the required quantity for circulation is going to be quite different from that of
Fisher’s. This is explained by the fact that international needs will certainly exceed the
money supply in domestic circulation and a nominal amount of world GDP.
In the world economy today, the real sector accounts for approximately 5–10% of GDP.
Therefore, the formula to calculate the money supply for the international use of the BRICS
currency should meet the following requirements: the quantity of money expressed in
a certain unit of account is to meet the needs of foreign trade, foreign investment, trade
in derivatives and foreign exchange on the world market, gold and foreign exchange re-
Int. J. Financial Stud. 2023, 11, 42 8 of 17

serves, international initial public offerings (or IPOs,), bank deposits, euro currency market
operations, money transfers abroad, etc. This formula, which characterizes international
circulation of the BRICS shared currency, is a simple arithmetic sum (Formula (2)):

M = ForT + FDI + PI + ForEx + G&EX + InterSec + Der + ForDeposit

(2)
+ EuroCurrency + MTrans f er + Etc.

In Formula (2), M is the quantity of money expressed in the BRICS digital currency
required for international circulation. It is the sum of money needed to pay for world
exports (ForT), foreign direct investment (FDI), portfolio investment (PI), world foreign
exchange transactions (ForEx), gold and foreign exchange reserves (G&Ex), euro dollar
accounts (ForDeposit), international securities (InterSec), derivatives (Der) and Eurobonds
(EuroCurrency), as well as money transfers (MTransfer) and many other purposes (Etc.).
According to the approach accepted in this underlying paper, the quantity of money
required for the international use of the shared digital currency for the BRICS has to be
equal to the total sum of the components in Formula (2). Numerically, Table 1 shows the
actual figures. The bottom line shows the sum of the components with the introduction
of the BRICS shared currency in 2021; for example, the bloc’s shared monetary authority
would have to issue at least 4.6 trillion of new money in USD equivalent.

Table 1. International use of the BRICS digital currency in billion USD equivalents.

Indicator Brazil Russia India China South Africa BRICS

Exports to all countries 185.2 285.5 260.3 2097.6 74.1 2902.7
Foreign direct investment outflows 7.8 22.3 5.1 217.2 3.4 255.8
Portfolio investment outflows −0.6 0.7 0.6 103.4 −6.8 97.3
Foreign exchange transactions 12.9 14.7 12.0 50.0 12.0 101.6
International bonds 4.2 3.8 3.6 25.7 2.5 39.8
Money transfers abroad 12.8 10.3 18.2 439.5 3.3 484.1
Foreign-exchange reserves – – – 99.4 – 99.4
Deposits abroad 155.1 155.5 5.4 248.6 43.2 607.8
Total use of the BRICS currency abroad 377.4 492.8 305.2 3281.4 131.7 4588.5
Source: compiled by the author.

It is worth noticing that Formula (1) used here to calculate the quantity of money
expressed in the shared currency of the BRICS for international use is a generalized view of
the money supply and may not necessarily be limited to the components mentioned above,
although they represent the overwhelming majority of international money transactions
that usually happen in USD these days. There may be, of course, more ingredients to add
to the formula, but, sometimes, they are minor and, therefore, viable to neglect.
So far, though, it is easier said than done. The existing currencies of the BRICS are very
little used in international transactions. It is, therefore, very difficult to predict whether the
BRICS digital currency will find a broader international use, not to mention its capacity to
rival and outperform the USD in the international monetary system. A few currencies in
the past several decades tried to do that and failed, including the German deutsche mark,
the Japanese yen, and the euro (Wu and Zhu 2018). Within the BRICS, only China’s yuan is
representative enough to be visible in the international foreign exchange reserves of some
countries. There are very few foreign countries in the world that are so bold as to keep
the yuan apart from the USD, especially during financial and economic crises. The recent
coronavirus crisis has shown that financial and economic tsunamis strengthen the USD’s
role as the ultimate world reserve currency. Thus, it will take quite a long time for the
BRICS digital currency to go global. Until that time, it may only be a means of shared BRICS
intra-transactions and money settlements. The quantity of money supply expressed in the
Int. J. Financial Stud. 2023, 11, 42 9 of 17

new currency of the BRICS for shared transactions depends on the numerical representation
of the components in Formula (1), which are shown in Table 2.

Table 2. Bilateral use of the BRICS currencies in billion USD equivalents.

Indicator Brazil Russia India China South Africa BRICS

Bilateral exports 42.0 35.3 16.3 130.6 10.6 234.8
Bilateral foreign direct investment 1.8 2.8 0.3 13.5 0.5 18.9
Bilateral portfolio investment −0.1 0.1 0.0 6.4 −1.0 5.5
Traded volume of local currencies on
– 4.2 – 1.8 – 6.0
the domestic markets of the BRICS
Bilateral bonds issued in local currency 1.0 0.5 0.2 1.6 0.4 3.6
Bilateral money transfers expressed in
2.9 1.3 1.1 27.4 0.5 33.2
local currencies
Foreign exchange reserves expressed in
– – – 0.1 – 0.1
local currency abroad
Bilateral deposits in local currency 15.2 19.2 0.3 15.5 6.2 56.4
Total bilateral use of the BRICS
62.7 63.4 18.4 196.9 17.1 358.4
currencies
Source: compiled by the author.

According to Table 2, the potential quantity of money expressed in the BRICS digital
currency needed for the bilateral or shared BRICS intra-use or circulation is equal to the
sum of money there is today in the circulation among the BRICS themselves plus bilateral
foreign trade deals, bilateral investment flows, bilateral trade in currency pairs of the local
currencies, the amount of national currency kept in gold and foreign exchange reserves,
as well as currency deposited in commercial bank accounts and money that crosses the
nations’ borders as money transfers.
The data in Table 2 also show that the quantity of money expressed in the new currency
of the BRICS, if it were launched in 2019, would have had to have been equal to about 360
billion in USD equivalents to cover the shared needs of the BRICS to conduct foreign trade
deals. Since foreign direct investment is a vulnerable, unstable and erratic value, which
is quick to react to all kinds of financial shocks in the world financial market such as the
coronavirus, it is impossible to precisely predict how much money expressed in the BRICS
shared currency would be required to make all these things happen, especially foreign
direct investment. Therefore, it is proposed here that its volume be omitted altogether
when calculating the amount of money supply needed for the circulation. Also, in order to
avoid a double count, it is worthwhile to put into the formula only the bilateral exports of
the BRICS when considering the amount of the shared foreign trade deals.
If the BRICS digital currency had gone beyond the nations’ borders of the bloc, the
quantity of money expressed in it would have to include the world exports of goods and
services, financial capital flows, international reserves, loans, deposits, foreign exchange
dealings in local currencies in the world market, and domestic needs in the money supply
currently happening in the existing currencies of the BRICS.
Internationally, the money supply for non-residents may exceed the needs specified by
Formula (1). In this case, there is a possibility of increasing demand for the digital currency
of the BRICS, since the volume of foreign trade may also increase, as well as foreign direct
investment, IPOs, bank deposits, etc. The money supply must vary depending on the
market demand, because the lack or very tight money supply of an internationalized
currency in the world market usually results in soaring interest rates and liquidity crises.
The limits to which the demand for an international currency may change depend
on its growth in world GDP, world exports, world financial capital flows, international
reserves, etc. During normal times, when the GDP grows adequately and as anticipated,
Int. J. Financial Stud. 2023, 11, 42 10 of 17

monetary policy is fairly easy to conduct. The central monetary authority is comfortable
about managing money circulation via short-term interest rates. The market reaction
is predictable. There is no urgent need in liquid assets. Thus, the central monetary
authority keeps supplying the currency on a scheduled basis. In extreme circumstances,
such as today’s, the money supply must change and adjust to the market conditions on
a repetitive basis, which usually takes place out of schedule. Therefore, determining the
limits of the money supply is a very difficult issue, especially during global financial and
economic crises.
An important challenge the BRICS are going to face while introducing the shared
digital currency will be determining how much money should potentially be put into
circulation. This is important, since this determines the demand for the BRICS currency.
The demand for the BRICS currency must fulfil all the needs in this currency on the part of
the public and private sectors and include the ingredients given in Formula (1).

4. Results
To understand whether the shared digital currency of the BRICS is going to work, it
is worth calculating the correlation of the local currencies’ exchange rate dynamics. The
correlation coefficients of the exchange rate dynamics of the BRICS local currencies in USD
terms differ greatly. Surprisingly, the member states with which Russia has no borders
and with which Russia trades less—Brazil and South Africa—have currency dynamics that
correlate more closely with the Russian ruble than with the Indian rupee and Chinese yuan.
It is also interesting to note that the Chinese yuan hardly correlates with any of the BRICS
currencies, except for the Indian rupee. Of course, India is a very important trading partner
for China and a neighbor (Table 3).

Table 3. Correlation coefficients of the BRICS currencies’ foreign exchange rates versus the USD.

Currency Pair Open Price Minimum Price Maximum Price Closing Price
BRL/RUR 0.9240 0.9245 0.9216 0.9241
BRL/ZAR 0.8773 0.8813 0.8771 0.8778
BRL/INR 0.3386 0.3268 0.3736 0.3438
BRL/RMB −0.5282 −0.5231 −0.5141 −0.5283
RUR/ZAR 0.8245 0.8248 0.8238 0.8250
RUR/INR 0.3387 0.3226 0.3731 0.3404
RUR/RMB −0.5384 −0.5385 −0.5135 −0.5406
ZAR/INR 0.2557 0.2407 0.2925 0.2559
ZAR/RMB −0.5949 −0.5914 −0.5722 −0.5958
INR/RMB 0.3671 0.3809 0.3458 0.3680
Source: compiled by the author.

The correlation coefficients of the BRICS’ currency exchange rate dynamics help to
estimate the possibility for this group of countries to make an optimal currency area. The
correlation coefficients in Table 3 do not appear to make it possible. A number of researchers
say that the BRICS will not be able to build the optimal currency area with a single currency.
However, at least three countries of the bloc can do that, because they have currency
dynamics that correlate quite closely, namely, Brazil, Russia, and South Africa.
The author’s calculations also find also quite tight correlations in Table 3, which
indicate that it may be possible to create a common currency for Brazil, Russia, and South
Africa that makes up an optimal currency area. As for the rupee, it correlates with the
real, ruble, and rand quite moderately. So, ceteris paribus, India may also join the optimal
currency area of the BRICS. On the other hand, China is left behind due to poor correlation.
However, if excluded from the potential monetary union, the whole plan for the digital
Int. J. Financial Stud. 2023, 11, 42 11 of 17

currency will be absurd. China is the driving force of the BRICS, and to omit it would
make the union unthinkable. The same argument was probably very important for the
policymakers behind the euro plan when they created it and thought about including
particular countries in the monetary union. That means that, in the BRICS, there must
be also a sort of a consensus that would send a message to the rest to create the common
currency.
To determine the exchange rate of the digital currency for the BRICS, one needs to use
the five national currencies’ quotations. They change on every single trading day relative
to the USD and include an open price, closing price, minimum price, and maximum price.
The initial stage of the calculations is to determine the exchange rate of the digital currency
relative to the USD. Then, it is possible to find the exchange rates of all other currencies in
the world toward the BRICS shared currency.
If the BRICS can potentially make up an optimal currency area, then there might also
be an optimal system of equations representing the BRICS’ existing currencies dynamics.
If such an optimal system of equations exits, it must make a matrix of five functions that
represent Formula (3), namely:


 1USD = nBRL,
1USD = mRMB,


1USD = pZAR, (3)
1USD = qRUR,




1USD = xINR,


where n, m, p, q and x are proportionate exchange rate ratios for each of the BRICS’ existing
currencies.
Next, it is necessary to represent these ratios in the form of equations which correspond
to the dynamics of historic data of the BRICS currencies’ exchange rates relative to the
USD. The USD equation dynamic is Y in the formula. The argument of the equation is a
constant component chosen for the BRICS currency, which shows the inclination of the
curve. The result is the system of five functions shown in Table 4. Figure 1 demonstrates
the dynamics of the new digital shared currency for the BRICS. According to the author’s
model, average annual exchange rate of the BRICS’s digital currency to the USD would be
31.2242. Assuming the GDP of the US and the BRICS were equal at the start of the period
in question, the exchange rate of the BRICS digital currency (BRICS-Exchange on the chart)
relative to the USD stood at 1:1. By the end of the period, the exchange rate changed to
0.9393 BRICS digital currency for 1 USD, meaning the shared digital currency for the BRICS
appreciated during the period under consideration.

Table 4. Equations system demonstrating BRICS’ currencies vs. USD exchange rate dynamics.

Currency Pair Open Price Minimum Price Maximum Price Closing Price
y = −2E − 10x4 + 2E − y = −1E − 10x4 + 1E − y = −2E − 10x4 + 2E − y = −2E − 10x4 + 1E −
USD/BRL 07x3 − 3E − 05x2 − 07x3 − 2E − 05x2 − 07x3 − 3E − 05x2 − 07x3 − 3E − 05x2 −
0.0028x + 4.0868 0.0034x + 4.0732 0.0023x + 4.1009 0.003x + 4.0907
y = −8E − 09x4 + 5E − y = −8E − 09x4 + 5E − y = −8E − 09x4 + 5E − y = −8E − 09x4 + 5E −
USD/RUR 06x3 − 0.0008x2 − 06x3 − 0.0007x2 − 06x3 − 0.0008x2 − 06x3 − 0.0007x2 −
0.0548x + 78.178 0.064x + 77.589 0.0586x + 79.031 0.0698x + 78.507
y = 9E − 12x4 + 1E − y = 1E − 10x4 + 3E − y = −8E − 11x4 + 2E − y = 1E − 10x4 + 3E −
USD/INR 07x3 − 4E − 05x2 − 08x3 − 1E − 05x2 − 07x3 − 6E − 05x2 + 08x3 − 1E − 05x2 −
0.0002x + 67.447 0.0023x + 67.358 0.0014x + 67.6 0.0029x + 67.53
y = 2E − 10x4 − 1E − y = 2E − 10x4 − 1E − y = 2E − 10x4 − 1E − y = 2E − 10x4 − 1E −
USD/RMB 07x3 + 4E − 05x2 − 07x3 + 4E − 05x2 − 07x3 + 4E − 05x2 − 07x3 + 4E − 05x2 −
0.0037x + 6.6064 0.0038x + 6.5968 0.004x + 6.6365 0.0038x + 6.6105
Int. J. Financial Stud. 2023, 11, 42 12 of 17

Table 4. Cont.

Currency Pair Open Price Minimum Price Maximum Price Closing Price
y = 7E −10x4 − 4E − y = 7E − 10x4
− 5E − y = 6E − 10x4 − 4E − y = 7E − 10x4 − 5E −
USD/ZAR 07x3 + 0.0001x2 − 07x3 + 0.0001x2 − 07x3 + 0.0001x2 − 07x3 + 0.0001x2 −
0.0196x + 16.453 0.0209x + 16.373 0.0191x + 16.567 0.0214x + 16.5
y = −1.46E − 09x4 + y = −1.42E − 09x44 + y = −1.496E − 09x4 + y = −1.44E − 09x4 +
9.60E − 07x3 − 1.46E − 0.000000906x3 − 0.00000098x3 − 0.000000906x3 −
USD/BRICS
04x2 − 1.62E − 02x + 0.000118x2 − 0.01888x + 0.00015x2 − 0.01652x + 0.00012x2 − 0.01866x +
3.46E + 01 34.398 34.78708 34.64764
Int. J. Financial Stud. 2023, 11, x FOR PEER REVIEW 13 of 17
Source: compiled by the author.

Figure 1. The exchange rate dynamics of the BRICS digital currency relative to the USD. Source:
Figure 1. The exchange rate dynamics of the BRICS digital currency relative to the USD. Source:
compiled by the author.
compiled by the author.

With the exchange

This underlying rate ofcontains
article the USDonly
to the BRICS’
part of thecurrency identified,
simulation model itdeveloped
is possiblefor
to
calculate its exchange rate toward the currencies of other countries. Table 5 shows
the common BRICS currency due to a lack of space. In particular, Figure 1 represents a some
of them.
hypothetical dynamic of the currency under consideration. It represents simulated data of
the probable movements in the currency’s fluctuation over the course of the last good year
Table 5. Annual average exchange rate of the currencies of some countries versus the BRICS cur-
2019 before the international financial and monetary system was shaken by the coronavirus
rency.
crisis and other volatilities. Figure 1 shows the movements of the hypothetical BRICS
Currency cryptocurrency in twofor
Units representations. One of
the BRICS’ Digital them depicts the currency
Currency as if it were a
Reverse Quotation
AUD (Australian dollar)sort of index averaging the dynamics of the five regular currencies of the BRICS
23.2013 0.0431 simulated
BTC (Bitcoin) and projected into the future based on
16,798.5600the assumption and retrospective data starting
0.0001
in 2014 when the BRICS leaders met in Fortaleza, Brazil, agreed on the creation of the
BOV (Bolivar of Venezuela) 3.4433 0.2904
New Development Bank, and laid the foundation for the Pool of Contingency Reserve
HKD (Hong Kong dollar) Currencies. The simulation approach 4.0225made use of the actual data, projected
0.2486 it into the
USD (United States dollar) 31.2242 0.0320
future, and got output in the form of a graph showing the average fluctuation of the BRICS’
EUR (euro) currencies. Meanwhile, the other34.5391 0.0290provides a
representation of the BRICS cryptocurrency
CAD (Canadian dollar) look at it as if it were a common 23.5605
currency for the BRICS. The cryptocurrency 0.0424is weighted
on the US dollar exchange rate, 42.1464
GBP (Great Britain pound) based on the assumption that, as soon as there is parity
0.0237
CHF (Swiss franc) 31.6896 0.0316
JAY (Japanese yen) 0.2870 3.4843
NZD (New Zealand dollar) 21.7423 0.0460
BRL (Brazilian real) 8.9557 0.1117
Int. J. Financial Stud. 2023, 11, 42 13 of 17

between the GDP of the G7 countries and that of the BRICS, hypothetically at the start of
the year 2019, a unit of the BRICS currency cost a US dollar in January 2019. Later on in the
process, the simulation model showed probable dynamics of the currency in question until
the end of 2019. Once on the crypto money market, the result of the floatation delivers a
new curve showing that the currency in question may get stronger than the US dollar by
the end of 2019. The simulation shows that, if floated, the US-dollar-to-the-BRICS-currency-
exchange-rate may take the value of approximately 0.935. Thus, if an investor considered
buying into the BRICS currency in early 2019, he or she would have losses due to the BRICS
currency getting stronger against the US dollar. In effect, the simulation model says that the
hypothetical BRICS currency floatation would hurt the BRICS’ exporters and benefit their
importers. Since the BRICS depend very much on foreign trade, the currency floatation
may have significant consequences for both importers and exporters. The largest effect
would be dealt on China’s foreign trade, where it is the largest actor in the world and
among the BRICS.
With the exchange rate of the USD to the BRICS’ currency identified, it is possible to
calculate its exchange rate toward the currencies of other countries. Table 5 shows some
of them.

Table 5. Annual average exchange rate of the currencies of some countries versus the BRICS currency.

Units for the BRICS’ Digital

Currency Reverse Quotation
Currency
AUD (Australian dollar) 23.2013 0.0431
BTC (Bitcoin) 16,798.5600 0.0001
BOV (Bolivar of Venezuela) 3.4433 0.2904
HKD (Hong Kong dollar) 4.0225 0.2486
USD (United States dollar) 31.2242 0.0320
EUR (euro) 34.5391 0.0290
CAD (Canadian dollar) 23.5605 0.0424
GBP (Great Britain pound) 42.1464 0.0237
CHF (Swiss franc) 31.6896 0.0316
JAY (Japanese yen) 0.2870 3.4843
NZD (New Zealand dollar) 21.7423 0.0460
BRL (Brazilian real) 8.9557 0.1117
RUR (Russian ruble) 0.4660 2.1459
INR (Indian rupee) 0.4648 2.1515
RMB (China’s yuan) 4.7027 0.2126
ZAR (South African rand) 2.1235 0.4709
Source: Author’s calculations.

5. Conclusions
The research comes close to analyzing the prospects of introducing a common currency
for the BRICS when discussing whether it should be a private cryptocurrency such as Bitcoin
or government-controlled digital money. Since the start of the pandemic in early 2020,
a number of countries in the world addressed this issue, and some of them decided to
introduce Bitcoin as legal tender. For instance, El Salvador really embraced the use of
Bitcoin. However, lately, the country might have regretted it after Bitcoin lost more 60% of
its value since the peak in November 2021. Some parts of Switzerland also joined the club
of countries using Bitcoin as regular money. We think that part of the reason for them to
do so is to make a sort of an offshore financial oasis there. In the past, they were not able
to do that and lost in competition to other safe havens like the Cayman Islands, Bermuda,
Int. J. Financial Stud. 2023, 11, 42 14 of 17

or Zurich; but now, with Bitcoin at their disposal, they thought they could make use of
it as an instrument to build a financial pyramid that would attract much needed foreign
capital to develop their economies and financial sectors in particular. However, due to high
volatility and a lack of control, this financial innovation seems to have failed, at least by
now, at the time of writing this article. The loss in market value of Bitcoin put pressure
on state finances in El Salvador and some municipalities in Switzerland. Their budgets
had to deal with deficits. Foreseeing it and seeing it now, other countries such as China or
Russia responded to the challenge of a new financial digital revolution by adopting their
own digital currencies that they can control. China launched a pilot digital yuan initiative.
Russia joined China on 1 April 2023. Early stage results in China show that, in general,
the majority of people have heard something of the pilot digital yuan, but they continue
to mistrust it, and prefer regular currency. Also, the amount of money the Chinese can
draw down on their digital yuan wallets is such that it makes it impossible to conduct some
serious transactions, thus making the currency obsolete. Russia is still in the process of
seeing its first encounter with the digital ruble. However, what is clear by now is that the
population’s reaction to it may be the same as in China. Some people may think of profiting
from it, while others neglect it, and when they understand the benefits of using the digital
ruble in the end, it would be too late to gain benefits, since it is usually newcomers who
take it all from such financial innovations. The reality, however, is clear, and the central
bank digital currencies (or CBDCs) will find more use in the future for the international
finance and the digital financial revolution, because they offer more control over finance,
especially in countries with strong and strict central governments such as those of China
and Russia. The CBDCs may also bring in order to financial chaos in countries with weaker
financial regulation and more libertarian approaches to finance such as South Africa and
India. Recent financial fraud cases and cases of corruption in finance in both countries
visibly demonstrate the need to have some sort of a government-controlled digital currency
that would allow them to interfere long before a financial shock strikes due to financial
mishandling. It is on this basis and the basis of previous research on the issue that this
underlying article tries to come up with an idea of a common digital currency for a group of
emerging markets to collectively manage financial and monetary issues with digital money
in hand (Sabilla and Kurniasih 2020). The research suggests that the BRICS common digital
unit of payment may indeed bring trust and security, especially for foreign trade partners
of the BRICS who would like to hedge their currency risks and foreign exchange risks when
exporting or importing important and valuable goods and services. This may improve
cooperation and bring the BRICS to a new level of integration through common money.
The research identified the significance of the most important macroeconomic features
that characterize the potential shared market of the BRICS digital currency, namely, a
common interest rate, or the rate of refinancing, and the quantity of money in circulation
needed for penta-lateral and international use. The exchange rate of the BRICS digital
currency is going to heavily depend on the amount of the interest rate of the hypothetical,
potential creditor of last resort. This problem is quite significant, since, for the international
circulation, it is very important to know how much foreign currency the BRICS digital
currency buys to trade with the rest of the world.
To be able to circulate a collective or shared digital currency, integrating nations must
have complementary, interdependent and interacting economies, markets, and industries.
The conditions of complementarity, interdependence, and interaction are very important,
since independent economic entities have a vast potential to internationalize their own
currency, i.e., some of them may do it alone and launch their currency for circulation in the
world economy, just as in the case of the USD, without any need to make a collective or a
shared currency. Within the BRICS, the most self-sustaining and self-sufficient economic
entity is China. However, even China does not have all the qualities, competences, and
qualifications required to achieve a currency internationalization similar to the USD.
Int. J. Financial Stud. 2023, 11, 42 15 of 17

Adopting a cryptocurrency as a collective or shared currency for a group of countries

such as the BRICS, according to the idea expressed in this research, is not relevant due to a
number of reasons.
First, a cryptocurrency’s value is vague, i.e., there is no definite, distinct, or standard
mechanism to set its exchange rate. For example, there are cryptocurrencies that have
exchange rates set up depending on the number of views or likes of a video or a commercial
on YouTube. In addition to that, setting an exchange rate of a cryptocurrency is out of place
and absurd, due to the fact that the general population and businesses need currencies to
be able quote their relevant exchange rates towards the national and foreign currencies that
circulate according to the rule of law by central monetary authorities or central banks.
Also, a national currency is one of the insignias of national sovereignty, whereas a
cryptocurrency has absolutely no peg to any country. This means that a cryptocurrency
has no sovereign characteristics and does not serve as a national unit of account. The more
time goes by, the better people are going to see that cryptocurrency is just a veiled form
of a product of financial engineering and financial innovation. Further delay to adopt it
as a regular currency will reveal just more of its highly speculative nature. Basically, the
market of cryptocurrencies was a sort of a replacement to the market of exotic derivatives
that collapsed in 2007–2008.
During financial and economic crises, a national currency becomes an instrument to
help an economy escape collapse when the government faces failure. Of course, genuine
money is prone to inflation and devaluation, but it sometimes helps soften implications for
the national economy. In 2014, for example, the US, the EU, and several other countries
introduced anti-Russia sanctions. Many countries had to suspend foreign trade with Russia,
and the Russian market faced supply shortages and dramatic price increases. The local
currency devalued, which made it more expensive for the consumers to buy imported
goods. The devaluation reduced the competitiveness of imported goods and switched
consumers’ demand to the domestic products. Russian manufacturers gained from those
sanctions. Many of them looked for means of import substitution, especially agricultural
firms. This strategy was part of the protectionist policy. Cryptocurrency may also devalue
and thus drive protectionism. However, its incredible fluctuations may lead to dramatic
price changes that are big enough to cause hyperinflation and destabilize an economy. The
economy would not be able to quickly adapt to such fluctuations, as well as hyperinflation.
An economic crisis caused by hyperinflation, drastic currency devaluation, and depreciation
could be very deep. The government debt and budget deficit expressed in cryptocurrency
would also be too difficult to manage.
Moreover, a central monetary authority controls all money in circulation to avoid
inflation, forgery, money laundering, etc. Therefore, for a cryptocurrency to work or
function as a national unit of account, there must be an institution in existence responsible
for its issue and setting of interest rates.
A cryptocurrency is comparable to something developed as a result of technological
change, whereas genuine money is the result of socio-economic, cultural, civilizational,
public, and political evolution. When Internet banking came into being, there were also
hypotheses and speculations in circulation that it would expand and replace conventional
banking. However, an Internet account still needs a commercial bank account, there is no
alternative institution to underwrite the risk of keeping deposits, and there are no legal regu-
lations that would insure deposits in cryptocurrencies. It is, therefore, very naïve to suppose
that a cryptocurrency will someday go from just being a financial byproduct created to
attract speculative capital to a vehicle on the financial and foreign exchange markets.
Cryptocurrencies attract investors by their shockingly high exchange rates to the
USD. This makes them believe that cryptocurrencies are very valuable. However, they are
so expensive only because they are artificially short is supply, which creates a feeling of
exclusiveness by owning them.
Few countries in the world have a capacity to provide lender of last resort facilities
when there is an urgent need for more currency. The last couple of decades of the 21st
Int. J. Financial Stud. 2023, 11, 42 16 of 17

century have seen a few examples of when the world had an urgent need in a central-bank-
for-the-world function.
Countries with weak governments only sometimes show that they want more inde-
pendence from the great economic powers such as the US through more cooperation or
integration with each other. However, they are very slow at negotiations and do not take
decisive steps to create unions. A notable example is a would-be African Union. African
countries negotiated the integration project for decades, but they always lacked the political
will to take a final and decisive step that would actually lead to the establishment of the
union. The BRICS are a different sort of a grouping. We hope that the BRICS at their twenti-
eth year of inception will have a better chance for more cooperation in helping to reform
the world economic order, the world financial architecture, and world monetary system.
The hope is that the BRICS at their twentieth year of inception after the crisis of 2020
will work more closely in digitizing economic activities. One of the ways to do that will be
a shared digital currency of the BRICS.

Funding: The article was written with financial support of the Russian federal budget according to
the assignment given to the Financial University (Grant Number: 0897).
Informed Consent Statement: Not applicable.
Data Availability Statement: Data available in a publicly accessible repository.
Conflicts of Interest: The author has no conflicts of interest to declare.

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