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The Emergence of The Unit: A New Decentralized Monetary Ecosystem for BRICS+

FINANCEThe Emergence of The Unit: A New Decentralized Monetary Ecosystem for BRICS+

The new decentralized monetary ecosystem of BRICS+ countries, named The Unit, is about to be unveiled, potentially overturning the current rules of the game. This new settlement unit, which will be 40% backed by gold, is already sparking much debate. Does it realistically stand a chance of being established, and is it fear of this that is causing central banks to continue buying gold at a frenzied pace? Tomasz Gessner, the chief analyst at Tavex, explains.

Is Change Coming?

The new settlement unit is to be called The Unit. Its concept has already been discussed by the BRICS+ Business Council’s working group on financial and investment services and has serious chances of being implemented next year. According to the creators of The Unit, it is a new system that addresses a key geo-economic problem—the global trust crisis. It is hard not to see this as a direct reference to the frozen Russian currency reserves by the West.

The new currency is designed to be a fast, reliable, and economically efficient solution for cross-border payments. This unit aims to change the rules of the game as a new form of international currency, which can be issued in a decentralized manner and then recognized and regulated at the national level. It offers a unique solution to bottlenecks in global financial infrastructure, qualifying for both traditional banking operations and the latest forms of digital banking.

By definition, The Unit can also help overcome price manipulation in commodity trading by establishing a Eurasian exchange where trading and settlements can take place in the new currency, linking trade and capital flows, thereby paving the way for developing new financial products for direct foreign investments. The strength of The Unit lies in eliminating direct dependence on other nations’ currencies and offering all global market participants a new form of apolitical money—with enormous potential for anchoring fair trade and investment.

A Golden Opportunity?

Importantly, The Unit will be anchored 40% in gold and 60% in a basket of BRICS+ currencies. Here lies a potential weak link. So far, I have not found any mention of convertibility into gold, so if it turns out to be similar to the recent proposal in Zimbabwe, users of The Unit would again have to rely on faith that some gold is deposited somewhere, but they will not get it in hand. Of course, the absence of this information in this article does not mean it will not be clarified in the future. This is potentially the moment when countries like China and Russia could reveal the actual amounts of gold in their reserves, which have been speculated about for a long time, points out Tomasz Gessner, chief analyst at Tavex. The second issue is the 60% coverage in BRICS+ currencies. To increase the project’s credibility, it would be useful to strengthen this currency basket before its launch, for example, by adding some collateral in the form of raw materials extracted in individual BRICS+ countries, he adds.

It is worth remembering that since 2010, central banks have become net buyers of gold, and this process has significantly intensified in recent years, with the main buyers being countries of the Eastern economic bloc. An absolute record was set in 2022 (nearly matched last year) when the West imposed sanctions on Russia, freezing its currency reserves and excluding it from the SWIFT payment system. This accelerated the processes of becoming independent of the dollar and US Treasury bonds, replaced by risk-free counterpart gold.

The Unit’s primary goal is to harmonize trade and financial flows by keeping them away from political pressures or rules that can be arbitrarily changed (another between-the-lines reference to frozen Russian reserves). The inevitable consequence is financial sovereignty. The whole process focuses on an independent monetary policy geared towards economic growth. The new unit is set to offer a complete, independent ecosystem, complementing the monetary infrastructure, which can certainly be extended to willing partners outside the BRICS+ group.

The Unit has already received support from the BRICS Business Council and is on the agenda for a key ministerial meeting in Russia next month, where an action plan for the summit in Kazan in October will be developed. This means that the project is likely to be seriously discussed within BRICS+ and ultimately adopted next year.

Its attractiveness could extend from Elon Musk to the New Development Bank, engaging a range of key global participants. It is also worth closely following the details of Putin’s visit to Beijing, as there may be some credible references to this project. In this context, recall the famous farewell of these two gentlemen in March last year, during which a declaration of some joint venture and changes not seen in 100 years was made, concludes Tomasz Gessner, chief analyst at Tavex.

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