- BRICS Explores Linking Instant-Payment Systems and CBDCs to Lower Trade Costs
BRICS economies are exploring links between their national instant-payment systems and central bank digital currencies, signalling a potentially important shift in the bloc’s financial integration strategy towards practical payment infrastructure rather than the more politically difficult creation of a common currency.
Reserve Bank of India Governor Sanjay Malhotra said discussions are focused on reducing the cost of cross-border transactions by improving connectivity between existing national systems. India is hosting the 2026 BRICS summit, and the RBI had earlier recommended that CBDC connectivity be placed on the agenda.
“Cross-border payments is an area of interest for all of us, including the BRICS, because we feel there is a lot of scope for reducing cost,” Mr Malhotra said in Mumbai.
“Various options are on the table, but it is still at discussion stage, including CBDCs and linkages of fast payment systems,” he added.
The distinction between connecting payment systems and creating a new currency is important.
A common BRICS currency would require much deeper economic integration, including difficult agreements over monetary policy, fiscal rules, exchange-rate management and governance. Interoperability allows members to retain their own currencies and central banks while attempting to make it cheaper and faster to move money between them.
Cross-border payments can pass through several correspondent banks and other intermediaries before reaching their final destination. Each additional layer can introduce fees, foreign-exchange conversion costs, compliance checks and settlement delays, particularly when smaller or emerging-market currencies are involved.
The economic proposition behind the BRICS discussions is therefore straightforward: if money can move almost instantly within national borders, policymakers want to know whether some of that efficiency can be extended internationally.
Its Unified Payments Interface has become the dominant infrastructure for domestic digital payments, and the RBI has already been pursuing links between UPI and foreign fast-payment systems. The central bank has described such interconnections as a way to provide faster and lower-cost cross-border transfers and remittances.
India has previously linked or pursued connectivity between its payments infrastructure and systems in markets including Singapore and the United Arab Emirates. In its agreement with the UAE, for example, the RBI said linking national fast-payment platforms was intended to facilitate faster and cheaper cross-border transfers.
BRICS would represent a more complicated proposition because of its scale and diversity.
The grouping now reaches well beyond its original five members and encompasses economies with different exchange-rate arrangements, capital controls, regulatory systems and geopolitical interests. Building common payment rails across those jurisdictions would therefore require substantially more than connecting software.
Central banks would need agreement on technical standards, foreign-exchange conversion, liquidity provision, settlement finality and mechanisms for handling failed transactions.
Compliance presents another challenge. International payments remain subject to anti-money-laundering and counter-terrorist-financing requirements, sanctions screening and rules governing the movement of financial data.
Faster payments cannot simply bypass those obligations. Indeed, one reason international payments are typically more complicated than domestic transactions is that money crossing borders encounters several legal and regulatory regimes simultaneously.
CBDCs could add another dimension. Central bank digital currencies are digital forms of sovereign money issued or backed by monetary authorities. Connecting them could eventually allow digital versions of national currencies to move through a common settlement architecture with fewer intermediaries.
The RBI had proposed earlier this year that BRICS consider connecting members’ CBDCs for trade and tourism payments, building on the bloc’s previous commitment to improve interoperability between national payment systems.
But much remains experimental. India itself continues to develop its digital rupee, including potential cross-border applications, and has pursued discussions with countries such as Singapore and the UAE on international payment pilots.
The significance of the BRICS proposal therefore lies less in an imminent technological revolution than in the direction of policy.
Rather than attempting to construct an entirely new monetary unit, members are examining whether the currencies and financial infrastructure they already possess can communicate more efficiently.
That could have more immediate consequences for businesses. A Ghanaian or African company trading with BRICS markets, for example, is less concerned with the symbolism of a new international currency than with how quickly suppliers can be paid, how much banks charge to transfer funds and what foreign-exchange spreads are incurred.
For small and medium-sized businesses in particular, transaction costs matter. Large multinational companies can often negotiate favourable banking and treasury arrangements. Smaller firms typically have less bargaining power and can feel disproportionately the cost of payment fees, correspondent banking charges and currency conversion.
If interoperability genuinely reduces those frictions, it could make some cross-border trade more efficient.
Remittances represent another potential beneficiary. Migrants frequently lose a portion of transfers through fees and exchange-rate margins. Faster payment-system links could create greater competition among providers and potentially allow funds to reach recipients more quickly.
But expectations around the US dollar should be kept in perspective. The BRICS discussions are likely to fuel renewed debate over “de-dollarisation”, particularly because the bloc has promoted greater use of local currencies in international commerce.
Mr Malhotra confirmed that the RBI will continue efforts to internationalise the rupee and promote local currencies for cross-border payments and trade.
Yet payment technology and reserve-currency status are not the same thing. The dollar’s global role rests on far more than the systems through which payments travel. It is supported by the depth and liquidity of US financial markets, widespread dollar invoicing, global holdings of dollar assets and the currency’s entrenched role in reserves, trade and finance.
A BRICS payment network could therefore provide additional channels for settling transactions in local currencies without necessarily displacing the dollar as the principal global reserve and financing currency.
In practice, the first transformation is more likely to be technical than geopolitical.
A Brazilian importer may be able to pay an Indian supplier more quickly. A tourist could potentially move funds without navigating multiple intermediaries. Companies trading between member states might be able to settle directly in national currencies where suitable foreign-exchange markets exist.
Those incremental improvements could ultimately matter more economically than the headline debate about replacing the dollar.
There are also unresolved questions around trade imbalances. Local-currency settlement works most smoothly when trade flows are reasonably balanced or when there are liquid markets in which surplus currencies can be converted or invested.
Where one country persistently exports much more to another, exporters may accumulate a currency they have limited use for.
That problem has already emerged in earlier attempts to increase local-currency trade and illustrates why payment infrastructure cannot by itself overcome broader economic imbalances.
Cybersecurity will be equally important. A network connecting payment infrastructure across some of the world’s largest economies would become critical financial infrastructure and potentially a significant target for cyberattack.
Speed cannot come at the expense of resilience. Central banks would therefore need common approaches to authentication, operational continuity, fraud prevention, data security and liability when something goes wrong.
That explains why the proposal remains at the discussion stage. BRICS has political motivation to improve financial connectivity, but implementation will require detailed technical and regulatory cooperation that is considerably less visible than summit declarations.
The bloc has debated cross-border payment cooperation for years, while individual members have simultaneously built their own domestic platforms. Instead of asking whether BRICS needs a new currency, policymakers are increasingly asking whether the financial infrastructure already operating in member states can be stitched together.
Economically, it could prove more useful. A new currency would be a political project requiring extraordinary levels of integration. Making existing money move faster, more cheaply and with fewer intermediaries is fundamentally an infrastructure problem.
If BRICS can solve that problem while maintaining regulatory integrity, the result could lower the cost of trade and remittances across a growing group of emerging economies. And in international finance, reducing the friction involved in using existing currencies may ultimately prove more consequential than creating another one.
