Welcome, crypto enthusiasts! The past two weeks have been a wild ride for BTC and ETH prices, but the cryptocurrency world remains a dynamic and exciting sphere. Today, we delve into an intriguing development in the global crypto landscape: the adoption of cryptocurrencies within the BRICS alliance.
Previously, we’ve discussed the stringent regulatory stance of global powers like the United States towards cryptocurrencies. However, this perspective isn’t universal. Some countries are not just open to crypto, but are actively embracing it. And these aren’t just any countries; we’re talking about the power-packed BRICS alliance.
What is BRICS?
BRICS is an acronym representing an alliance of five major emerging national economies: Brazil, Russia, India, China, and South Africa. Established in 2009, the BRICS alliance aims to use its growing economic power to challenge Western hegemony and create a more equitable global economic system. Collectively, the BRICS nations contribute 31.5% to global GDP, surpassing the G7’s share, which has fallen to 30%. This shift in economic power indicates the growing influence of BRICS on the global stage. Furthermore, the alliance’s influence appears to be expanding, with countries like Turkey and Saudi Arabia expressing interest in joining.
Cryptocurrency Uses in BRICS Countries
Russia
Russia is definitely a unique case to show cryptocurrency adoption in real-life situations and the scale of a country. In Russia, the landscape of cryptocurrency usage has been shaped by both legislative and geopolitical factors. The country’s legal framework for cryptocurrencies was established by President Vladimir Putin’s 2020 law on digital financial assets, which legalized cryptocurrencies but prohibited their use for goods and services within the country.
However, the geopolitical tensions resulting from the Russian-Ukrainian conflict and subsequent international sanctions have shifted this landscape. With the local currency, the Ruble, becoming less viable for international transactions due to these sanctions, many Russians turned to Bitcoin as an alternative. This led to a surge in Bitcoin’s price on local exchanges, with Russians reportedly paying up to $20,000 above the market rate.
In response to these developments, Russia is now exploring using cryptocurrencies for settling international transactions. Furthermore, the country has emerged as the world’s second-largest crypto miner, indicating a strategic move towards leveraging cryptocurrencies for cross-border deals.
Russia has been a great example to showcase cryptocurrency’s value and purchasing power. Recognized globally how Bitcoin has its name called “Digital Gold.”
China
China’s relationship with cryptocurrency has been a rollercoaster ride over the past decade. From initial openness to mining and trading, to a complete ban in 2021 that brought the bull market run to a screeching halt, China’s crypto journey has been nothing short of dramatic. If you’ve been following our previous articles, you’ll recall our discussions on China’s strategic approach and the recent crypto regulations in Hong Kong.
In essence, China is using Hong Kong as a testing ground for crypto trading and investment, keen to tap into the economic growth potential of the crypto market. At the same time, these regulations serve as a tool for the government to track and monitor citizens’ crypto assets and activities. The outcomes in Hong Kong will likely set the stage for what’s to come in mainland China.
If Hong Kong successfully transforms into a crypto-friendly market and reaps significant economic benefits, we could witness the opening of China’s crypto market. The sheer size of China’s potential user base could trigger the next bull run, especially if funds start flowing into that allowed cryptocurrency.
If you want to dive more deeply into China’s and Hong Kong’s regulations, look back to our previous article to get the complete picture!
India
India presents a fascinating case study in the world of cryptocurrency regulation. The country passed the Cryptocurrency Bill in 2021, followed by a 30% tax on crypto income and a 1% Tax Deducted at Source (TDS) in 2022. Simultaneously, the government is developing its official digital currency, a Central Bank Digital Currency (CBDC).
Now, consider this: India is the world’s most populous country, with half its population under 30. The potential for a burgeoning crypto user base is immense. Currently, 7.1% of Indians own crypto assets. However, the high tax rates and stringent regulations have significantly curtailed crypto investment, trading, and potential everyday use.
On the good side, the Indian government already has a regulatory system to monitor crypto activities. As the global cryptocurrency trend continues and other countries reap the economic benefits of embracing crypto, we might see a relaxation in India’s tight regulations. And that would be very easy for India to implement, as loosening it is much easier than tightening it.
Brazil
Brazil, the largest Latin American crypto economy, presents a compelling narrative in the cryptocurrency world. With a median population of 32, the country is ripe for digital and fintech investment. Interestingly, World Bank statistics reveal that about 25% of Brazilians live below the poverty line, and among crypto holders in Brazil, 40% earn less than the country’s minimum wage. Yet, the volume of Bitcoin trade has surpassed that of gold, hinting at the direction of crypto adoption in Brazil.
This scenario paints a picture of a young, tech-savvy population with a significant low-income segment, demonstrating a solid inclination toward crypto. In response to this growing adoption, the Brazilian government introduced crypto regulations and taxes in 2022. Crypto gains are now taxed at rates ranging from 15% to 22.5% based on profit, and transactions involving selling, buying, spending, or swapping crypto are also taxable.
This tells a different story from India. Despite these new rules, the allure of crypto in Brazil remains strong. A coffee blockchain project like “Coffeecoin,” suggested by a major coffee bean cooperative, Minasul, is an example of Brazilians adopting crypto in practical utilities, not just trading and investing. As the government fine-tunes these regulations, it aims to create a safer playground for crypto enthusiasts, protecting them from fraud and preventing money laundering. It also provides a regulatory framework for crypto projects like “Coffeecoin,” which can grow with regulatory support and operate legally.
South Africa
Let’s take a journey to South Africa, a country that’s writing its own unique chapter in the crypto adoption story. Picture this: the local currency, the ZAR, is on a rollercoaster ride, losing value and facing volatility due to escalating energy issues and allegations of aiding sanctioned Russia. The ZAR has depreciated by nearly 10%, making it one of the worst-performing African currencies 2023.
Meanwhile, South Africans are turning to the stability of coins like USDT. Over half of South African crypto owners are using cryptocurrency for purchases, signaling that crypto is stepping into the mainstream spotlight as a form of payment. Most of these crypto enthusiasts fall into the 18–44 age group, adding a youthful energy to the crypto scene.
South Africa also has a thriving community of blockchain developers and entrepreneurs, with numerous startups blossoming under crypto-friendly regulations. The country is opening up a world of opportunities in the crypto space, from centralized exchanges and blockchain technology to remittances and financial management for the unbanked.
Despite implementing taxes on crypto gains and transactions, the growth of crypto adoption shows no signs of slowing down. This could be attributed to the robust community of builders and the fact that most crypto owners use it for purchases rather than investments, making the tax less of a deterrent. It’s a testament to the fact that real adoption is driven by real usage.
BRICS Alliance Currency
Alright, let’s circle back to our main players: the BRICS nations. Despite their diverse approaches to crypto regulations and blockchain development, they all share a common thread — a growing interest, usage, and adoption of cryptocurrencies. But there’s another commonality: a desire to step out from the shadow of the U.S. dollar’s influence. And here’s where an intriguing solution comes into play: what if they launched a digital currency of their own, an alliance token, akin to the Euro in the EU?
Picture this: the Euro, a unified currency that not only facilitates transactions within Europe but also significantly reduces the influence of the U.S. dollar. It’s a collective force that empowers the EU nations to stand their ground in international affairs. Now, imagine a similar scenario for the BRICS nations. Launching an alliance token could be a strategic move, streamlining international transactions with a single currency, aiding in their quest for de-dollarisation, and paving the way for developing their own Central Bank Digital Currencies (CBDCs).
And here’s the kicker: this isn’t just a hypothetical scenario. The BRICS nations are seriously considering this, studying the feasibility of implementing such a token. So, who knows? In the not-so-distant future, we might see citizens opting for a BRICS token over USDT, using it for purchases and holding it as a store of value. In the end, here comes the choice from users. But if the BRICS nation implements real-life usage locally, like local payment, use for salary payment, crypto trading pairs on exchanges, etc. There will definitely be a huge portion of users who would go for it, just for the convenience and acceptance.
Reality and Concerns
Let’s take a moment to peel back the layers of this enticing narrative and address some of the underlying concerns. For starters, how would the initial conversion rate of the alliance token to each country’s currency be determined? The volatility of currencies like the South African Rand could potentially destabilize the system.
And let’s not forget the elephant in the room: the U.S. It’s unlikely they’ll sit idly by as another alliance rises to challenge the dominance of the U.S. dollar.
Moreover, the concept of an alliance token is uncharted territory. It’s not just a new version of the Euro; it’s the world’s first alliance token on a blockchain, essentially a pioneering Central Bank Digital Currency (CBDC) managed by an alliance of countries.
On the one hand, this decentralization of power could instill confidence in potential users, as no single country would have dominant control over the token. However, it also means that the interests and voices of five different nations need to be considered, potentially leading to lengthy deliberations and delays.
The immutability of blockchain technology adds another layer of complexity. Any decisions made are irreversible, necessitating extra caution, thorough audits, and unanimous agreement before launch.
Powerful countries like China and Russia may drive discussions and push for results, but this could also raise concerns about centralization, potentially eroding trust among potential users. So, while the prospect of a BRICS alliance token is undoubtedly exciting, it’s also fraught with challenges and uncertainties.
Final Thoughts
As we navigate through an era marked by global tensions, political upheaval, and the transformative power of cryptocurrencies, it’s clear that we’re standing on the precipice of significant change. The disruptive nature of blockchain technology presents both an opportunity and a challenge for governments worldwide. They’re grappling with harnessing its economic benefits while ensuring it doesn’t slip out of their control.
Countries within the BRICS alliance, in particular, are uniquely positioned to challenge the dominance of the U.S. dollar. Their shared ambition to reduce their reliance on the U.S. dollar and collective economic power could potentially shake up the global financial order.
Given the recent increase in the U.S. debt limit, the dollar’s vulnerability is more pronounced than ever. For the first time in many of our lifetimes, we may be about to witness a shift in the balance of monetary power. As we continue to monitor these developments, one thing is clear: we’re living in truly interesting times.
