Squashing Fears of the BRICS Launching a ‘Unit’ of Account

Earlier this week, rumors surfaced a new BRICS digital currency—backed by a basket of national currencies and gold—had test launched. Known as “The Unit,”^[i] some cast it as the latest alleged threat to the dollar’s status as the world’s primary reserve currency. But, as with prior supposed challengers to the greenback, all these fears are rooted in faulty thinking.

In the only major media depiction we can find, a Jerusalem Post piece describes The Unit as a special, digital unit of account used chiefly for settling trade between BRICS countries.^[ii] Supposedly, it is backed by a reserve basket consisting of 40% gold and 60% BRICS currencies including China’s yuan, Russia’s ruble, India’s rupee, Brazil’s real and a few others. The article argues this could be the first step toward a parallel, non-Western financial system allowing BRICS nations to trade bilaterally without using the dollar or the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.

The story posits that the International Research Institute for Advanced Systems (IRIAS) just tested The Unit for settling trade on the blockchain in a pilot program aimed at determining feasibility.^[iii] We can’t vouch for the veracity of this. IRIAS only has five member nations—Bulgaria, Hungary, Mongolia, Cuba and Russia (where it is headquartered). The last two are riddled with SWIFT restrictions, effectively locking them out of Western financial markets, while the others are former Soviet or Soviet-influenced states with ties to Moscow. Oh, and note no other major, reputable news sources have picked up this story. Reports of these “tests” could simply be propaganda from pro-Putin factions, which should give you reasons to be skeptical of this. Still, a few finance twitter bigwigs retweeted it as if it were fact, hyping up fear. So we are addressing it, knowing there is a risk this story is phony baloney.

Regardless of this tale's veracity, worries over the effects are phony baloney anyway, in our view. The big fear? At scale, the article asserts, The Unit could gradually weaken the US dollar’s central role by giving BRICS and its partner countries an alternative for cross‑border trade and reserves. It is another “de-dollarization” worry, warmed over, rehashed and added to the pile.

Yet this is faulty thinking, for several reasons. For one, The Unit isn’t an actual currency, like the US dollar or euro (assuming the story is real!!!). You can’t buy anything with it. Rather, it is a settlement instrument; a payment mechanism used to conclude cross-border transactions and settle international trade. It isn’t a currency in the traditional sense of carrying cash or even a stablecoin with public access.

And we are skeptical the use grows quickly (if this is even a thing!!!). Why? BRICS countries aren’t politically or economically aligned. BRICS aren’t—and have never been—a cohesive economic bloc. They have no official alliance or trade deal, and their economies and political systems vary widely. Some are open economies with free floating currencies. Others are communist with strict currency controls (China), even though it is trying to liberalize the use of yuan in international trade—which would compete with The Unit. ^[iv]

Plus, BRICS countries still trade with America—a lot. In 2024 country-specific terms, imports from the US ranked second highest for Brazil and China and fourth for India and South Africa (Russian data are harder to come by).^[v] Meaning, major swaths of their economies rely on imported American oil and gas, electrical equipment, machinery or what have you. All of these require US dollars to buy. They also receive dollars when they export to America, which most BRICS (outside the R) do in droves. Thus, not even BRICS can abandon the dollar without significant, foundational economic changes—which would take years.

Perhaps most importantly, though, the US dollar still dominates global trade. And it isn’t close. According to the Bank for International Settlements (BIS), around 89% of international transactions use the greenback (Note: this is out of 200%, given all currencies trade in pairs).^[vi] For reference, the Chinese yuan is involved in just around 8.5%. Other BRICS currencies? Even less. Our point: A broad shift away from the dollar to this settlement system would take a long, long time. Far longer than anything markets are likely to weigh.

Regardless, America doesn’t really benefit from the dollar’s world currency reserve status. For years, many have claimed it grants America an “exorbitant privilege” to borrow more cheaply. Thing is, 10-year government bond yields in many nations are below America’s—not just low-debt nations, either. Consider: France, whose former prime minister coined that whole “exorbitant privilege” term eons ago, has a very similar share of debt relative to GDP as the US and lower rates. Italy has more—and lower rates. Japan has the developed world’s highest, far exceeding the US, and much lower rates.^[vii] Nor does the Treasury collect a fee when others transact with the USD. There just isn’t much evidence of an advantage in any sense.

The dollar’s dominance is tied mostly to America’s massive economy, which boasts the world’s deepest, most liquid and open financial markets. Like most of these other hypothetical shifts, none of these are likely to change overnight.

That said, we aren’t so sure BRICS’ key focus is upending the dollar here. Rather, it smells like an attempt to create a financial system outside of the reach of potential Western sanctions, particularly tied to Russia’s experience after 2022’s invasion of Ukraine. It isn’t an offensive against the dollar in this light—it looks more like a defensive move to assuage fears of their economies losing dollar access.