India's central bank has reportedly proposed that BRICS countries link their respective digital currencies to facilitate cross-border transactions.
The move is aimed at improving the efficiency of trade and tourism payments and reducing reliance on the US dollar.
According to a Reuters report on Monday, the Reserve Bank of India (RBI) has recommended to the Indian government that the proposal for linking a central bank digital currency (CBDC) be included in the agenda of this year's BRICS summit.
The proposal is seen as an extension of the BRICS summit declaration in Rio de Janeiro last year that called for increased interoperability between member countries' payment systems to make cross-border transactions faster and more efficient.
The RBI has also expressed interest in linking India's digital rupee with other countries' CBDCs to speed up international transactions and strengthen the use of the Indian currency globally.
However, the central bank stressed that this effort is not aimed at weakening the role of the US dollar in the global financial system.
TECHNOLOGY AND REGULATORY AGREEMENT ARE THE MAIN CHALLENGES OF BRICS CBDC PROJECT
To ensure the success of this digital currency linking project, several key aspects need to be addressed including technology compatibility, governance frameworks, and mechanisms to address trade imbalances between member countries.
These issues are expected to be major topics of discussion among policymakers.
In addition, concerns about the acceptance of technology platforms from other countries among BRICS members could potentially be a major challenge. The lack of agreement on common technology and regulations could delay the implementation of the proposal.
In a related development, reports last week showed that a group of central and commercial banks are expanding testing for Project Agora, a cross-border payments initiative announced in 2024.
The project aims to develop a multi-currency integrated ledger that combines tokenized commercial bank deposits with wholesale central bank money through a programmable platform.
Project Agora uses smart contract technology to improve the efficiency, transparency, and speed of international transactions, in line with the changing global payments landscape increasingly driven by new technologies such as artificial intelligence and system automation.
This transformation is taking place in a global environment characterized by trade uncertainty, tariff pressures and increasingly challenging working capital conditions.
In this context, faster, more stable and predictable cross-border payment systems are seen as providing a competitive advantage to countries and financial institutions.
