The BRICS group has taken steps and has plans that challenge SWIFT and the dominance of the dollar with SPFS and CIPS systems.
According to Canada’s Seabridge Gold, Asian and central bank demand since late 2021 has dominated the gold market.
Central banks have stated in surveys conducted by the World Gold Council that they are increasing their gold reserves because gold offers better inflation protection than the US dollar, as well as greater geopolitical security in a world characterized by increasing sanctions and the emergence of exclusive trading blocs.
BRICS vs. SWIFT and the dollar
Central bank net purchases have been extraordinary, reaching 1,082 tons in 2,022 and 1037 tons in 2023. This increase has continued with record purchases in Q1 2024 of 290 tons.
Much of the central bank purchases are coming from the BRICS countries, where gold has experienced a resurgence.
Seabridge Gold refers that gold is no longer just a passive reserve asset; it is now actively used by BRICS countries as a final settlement instrument in transnational trade.
The company makes two arguments. The dollar is losing its dominance over the crucial energy trade. In addition, both China and Russia “have successfully developed” alternatives to the SWIFT interbank transaction system, raising the prospect of a greater role for gold as the only universally accepted alternative to the dollar.
Toronto-based Seabridge Gold focuses on the exploration and development of precious metals, for which it acquires and explores for large deposits of gold, as well as copper, silver and molybdenum, primarily in Canada and the United States.
China and Russia
For more than 10 years, China and Russia have sought to reduce their dependence on the dollar. They do so to mitigate sanctions risks and strengthen their economic leverage. However, they remain tied to the U.S.-dominated financial system.
On the one hand, China limits the international use of the renminbi. On the other hand, the Russian ruble has little presence in global markets.
China launched the CIPS system, designed to facilitate cross-border payments in yuan. In addition, in 2021, its central bank formed a joint venture with SWIFT. The goal: to create a data center and local network connected to the global platform, with greater internal control.
In the meantime, Russia developed its own system. This is the SPFS, created after the exclusion of Russian banks from SWIFT due to U.S. pressure. With these actions, both governments seek to reduce their exposure and gain autonomy in international payments.