By Yaroslav Lissovolik

Whether in trade, investment or macroeconomic policy, the digitalization of the world economy is becoming an inexorable trend as well as a potent factor of countries’ competitiveness. Global trade is becoming increasingly driven by digital services and e-commerce, while trade policy is significantly impacted by digital economic agreements (DEAs). In the real sector, productivity growth is critically becoming dependent on the expansion in the digital economy. In monetary policy there is the propagation of projects pursued by Central Banks to launch national digital currencies, with mounting efforts by countries to explore the pathways to Central Bank Digital Currencies (CBDC) inter-operability. For emerging markets, most notably the BRICS+ economies that are leading the global CBDC efforts, a platform for inter-operable CBDCs could represent one of the most tangible contributions of the developing economies to the emergence of a new modern era monetary and financial architecture of the global economy.

The CBDC progression across the world economy

An increasing number of economies and even regional blocs are at this stage pursuing the goal of creating their very own Central Bank Digital Currencies (CBDCs) – the building material of the new global financial architecture. At this stage, there are only 3 economies that have launched a full-fledged retail CBDC accessible to the use by the public:

- Bahamas (Sand Dollar): launched in October 2020, this project represented the first nationwide CBDC undertaking

- Nigeria (eNaira): launched in October 2021 with the main focus being greater financial inclusion

- Jamaica (JAM-DEX): initiated in July 2022

In terms of CBDC testing platforms the most well-known and one of the more advanced is the M-bridge – a system that represents a multi-CBDC platform that brought together People’s Bank of China (PBOC), Hong Kong Monetary Authority (HKMA), Bank of Thailand (BOT), Central Bank of the United Arab Emirates (CBUAE), Saudi Central Bank (SAMA) as well as the Bank for International Settlements (BIS) – Innovation Hub Hong Kong Centre (coordinating role). Interestingly, all major country participants are related in some form to the BRICS grouping, with China being a core group member, Saudi Arabia being an invited country, Thailand being a member of the BRICS partnership belt and UAE being a core BRICS member that acceded as part of the 2023-2024 expansion.

After the BRICS summit in Moscow in 2024 and the discussions on the possibility of emulating the progress made in CBDC inter-operability within the M-bridge framework, the Bank for International Settlements (BIS) handed over the further development of the M-bridge system to its participants. While the completion of the M-bridge mission is still at least several years away, the platform attained a critical degree of progress in demonstrating the technological feasibility of CBDC transactions and the benefits that such a system could deliver to participating economies. In this respect, the M-bridge framework remains a viable model for the BRICS economies in forging ahead with the CBDC inter-operability efforts.

Outside of the M-bridge project, the BRICS economies are among the most active participants in other key CBDC co-integration efforts. In particular, South Africa (BRICS core member) together with Malaysia (BRICS partner country) participate in Project Dunbar – an effort to build a platform for multi-CBDC transactions that counts Australia, Singapore and the BIS among its other participants.

BRICS economies are also among the most advanced in launching key pilot projects on CBDCs, which in particular concerns China (e-CNY) (currently the world’s largest CBDC pilot covering 17 provincial regions) as well as India (Digital Rupee – e₹) with its CBDC project covering segments of the economy such as government state benefits and featuring wholesale and retail pilots.

The CBDC system has also been tested at the regional level in emerging markets – this track was pioneered by the Eastern Caribbean Currency Union. In particular, the Eastern Caribbean Central Bank launched its CBDC (named DCash) in 2021 – the project operated for more than a year providing access to settlements throughout the union. The DCash system operated on a private blockchain hosted on Google Cloud, with CBDC users being able to send and receive transfers via a mobile app after setting up a wallet with an authorized bank. In 2024 the project was discontinued after systemic disruptions with the objective of reevaluating its results ahead of the DCash 2.0 relaunch.

What role for BRICS?

What the discussion above suggests is that emerging markets and BRICS+ economies are quite active in the CBDC domain. During its BRICS chairmanship in 2024 Russia presented its vision of the possible changes in the global monetary system in a report titled “Improvement of the international monetary and financial system. Strengthening multilateralism for just global development and security”. In particular, the report calls for “introducing DLT solutions or a new multinational platform based on modern technologies, which would include a financial messaging component and allow to conduct settlement via tokens backed by national currencies, CBDCs, at the discretion of each participating country – this approach would allow a greater degree of decentralization”.

The authors of the report point to the elimination of credit risk and the reduction in processing time and costs associated with the introduction of a DLT settlement model in which CBDCs are utilized. The policy proposal directly references the case of M-bridge as a potential model for such a system for BRICS, with the cost of DLT transactions amounting to just 1-2% of the standard comparable operation. The latter in turn translates into palpable savings: “the economic effect in the context of BRICS cross-border trade, might yield savings of up to USD 15 bn per annum in a scenario where half of all cross-border transfers are done via DLT solutions”.

Against the backdrop of intensifying geopolitical tensions, including the pressure exerted on the BRICS economies from the US, India as the chair of the BRICS grouping has apparently delivered a further impulse to discussions on the possibility of linking BRICS countries CBDCs. While no official confirmations have been made, media reports do suggest that the Central Bank of India has recommended to the government to include the co-integration of BRICS countries’ CBDCs into the 2026 agenda for India’s chairmanship in the bloc. As regards the BRICS common currency, this path is currently downplayed by BRICS representatives in their public statements, with officials prioritizing the development of reliable settlement mechanisms across emerging market economies. Nonetheless, expert discussions are bound to continue and the CBDC track offers a potential gateway to rendering the BRICS common currency project feasible.

At this stage, there have been a number of possible modalities for a BRICS common currency proposed – ranging from a unit of account to a reserve currency and to digital currency that may be used to conduct transactions across BRICS+ economies. The first proposal advanced in 2018 in Valdai club discussions was focused on the creation of a reserve currency and was given the code name R5 – due to the coincidence of all core BRICS economies having their currencies starting with the letter R (renminbi, rouble, rand, real, rupee). Subsequent discussions prioritized issues such as the technical feasibility of launching a common currency – something that led to the proposal of introducing a unit of account – arguably the most straightforward and simplest way of creating the common currency. This track was developed and favored by Alexei Mozhin, who was a key pioneer of the R5 project and who played a leading role in organizing the discussions of the topic within the BRICS+ expert community.

Within these discussions, the CBDC path featured quite prominently, suggesting that if the BRICS economies do opt for a common currency, it may be precisely the CBDC track that technically may prove to be the most feasible and promising for such a project. According to one of the leading Brazilian economists, Paulo Nogeira Batista Jr., the CBDC framework could allow the BRICS economies to conduct mutual settlements without creating a physical monetary unit. As argued by Paulo Nogeira Batista Jr, the common currency “would be used only for cross border transactions and as a reserve asset, functioning in parallel to national currencies. It would not need to exist in physical form as paper money and coins. It could be a digital currency, similar to the Central Bank Digital Currencies (CBDCs) that are in the process of being created in a number of countries”.

The hope at this stage then is that further discussions and cooperation among the BRICS+ experts will lead to a credible framework for a common BRICS currency predicated on CBDC inter-operability.

Final thoughts

Perhaps what matters most in the common efforts of BRICS economies to bring greater inter-operability into their CBDC projects is that they are very much in line with the development trends in the evolution of settlement and payment systems in the global economy. This is currently the technological frontier of monetary system engineering that attracts the efforts of some of the leading emerging and advanced economies as well as international organizations such as the Bank for International Settlements (BIS) and the International Monetary Fund (IMF).

In the end, the BRICS+ grouping is well positioned not just to participate in the emerging new financial architecture of the world economy, but to lead some of its most dynamic and promising tracks such as the CBDC inter-operability route. A credible framework of cross-border payments based on CBDCs may deliver sizeable benefits via the reduction in the time and costs of transactions, a greater transparency and security in financial operations, greater optionality in terms of payment methods as well as greater inclusivity for emerging markets in building the new international financial architecture.

Yaroslav Lissovolik is the Founder of BRICS+ Analytics.