Lyn Alden Observes Difficulty in Delivering Gold-backed BRICS Currency

Lyn Alden, an investment strategist, claims that A BRICS common currency will fight to initiate and maintain. However, initiatives to overthrow the United States dollar could affect Bitcoin.

Lyn Alden, a macroeconomist, has expressed uncertainty concerning a proposal resulting in five nations partnering to create a common BRICS currency. She claims that it may fail to initiate and overthrow the U.S. dollar.

Via an interview with Sure Trade Group days before BRICS annual summit in South Africa, she claimed that it would be pretty difficult for BRICS members, including Brazil, Russia, India, China, and South Africa, to develop a gold-supported currency for vast utilization.

Russia President Proposed Development of Global Reserve Currency to Rival Dollar

At the BRICs summit in 2022, Vladimir Putin, Russia’s president, initially proposed developing a global reserve currency to compete with the U.S. dollar as the international reserve standard. Later, the proposal was confirmed to come as a gold-supported currency.

Nevertheless, Alden claimed the model was faulty. According to her, using gold to support a fractional-reserve banking system works briefly since the currency units grow faster than gold. Instead, Alden believes that the most probable outcome would be BRICS nations reducing their dependency on the U.S. dollar for cross-border payments by utilizing their currencies for trade, especially the Chinese yuan.

Former Goldman Sachs Economist Labels BRICS Common Currency Absurd

Alden’s claims echo those of Jim O’Neil, ex-Goldman Sachs economist. Via an August 15 interview with the Australian Financial Review, he rejected the common currency idea by terming it ‘absurd.’ He questioned whether a BRICS central bank would be established and how that would be done. Further, he claimed that the idea would be unviable.

In early August, Vinay Mohan Kwatra, India’s foreign secretary, dismissed the likelihood of BRICS creating a common currency. He claimed that their primary focus entails using their currencies to boost trade. The nation’s representatives will appear at the 15th BRICS yearly summit held in South Africa on August 22-24. It will address matters associated with creating a common currency, the BRICS Development Bank, global trade, and the Ukraine-Russia battle.

U.S Dollar Dominance Likely to Influence Bitcoin

In the meantime, Alden added that possible moves to diminish the dominance of the United States dollar could impact Bitcoin’s progress. The de-dollarization attempt might result in less foreign demand for United States Treasuries and greater Treasury yields. Besides, the attempt could contribute to the requirements for the United States Federal Reserve to fund a significant share of the government’s shortfalls.

A rise in treasury yields owing to a significant de-dollarization event could lead to Bitcoin’s price encountering headwinds. This is because of the tendency of risk assets to underperform under those conditions. Alden also believes that Bitcoin’s price might rise if the Federal Reserve helps more banks to keep them afloat.

In the longer term, when the Federal Reserve System (FED) is required to offer a liquidity backstop for the Treasury market, this might be appropriate for Bitcoin. This is similar to how Bitcoin rose after the FED’s intervention into the nation’s banking system in March 2023.

A liquidity backstop happens when a bank’s liquid assets fail to achieve its financial obligations sufficiently. This evokes the need for the central bank to offer emergency liquidity.