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The BRICS nations are seeking to replace the dominant U.S. dollar with a new international trade currency, aiming to diminish the dollar's supremacy as the global reserve currency and initiate a decline in its value.
However, their plan may face a significant obstacle with the upcoming launch of the Federal Reserve’s long-anticipated faster payments system, known as FedNow. The FedNow service is scheduled to be introduced in July, a month prior to the BRICS nations’ intended launch of their new currency.
FedNow is a newly introduced instant digital payment system by the Federal Reserve, allowing individuals to send and receive real-time payments. This service will be available 24/7 throughout the year, enabling individuals to make digital transactions using the U.S. dollar to purchase goods and services.
The phased rollout of FedNow will commence in July 2023, with the Federal Reserve aiming to stay ahead of the BRICS nations’ plan to establish a new currency. As U.S. banks and leading financial institutions adopt FedNow, it may compel foreign entities to utilize this service.
Consequently, the U.S. dollar will undergo a transition from traditional fiat currency to a digital form in the global realm, maintaining its dominance in cross-border transactions.
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According to Fed Chair Jerome Powell’s testimony to the House Financial Services Committee on March 8, “What FedNow will do is it will enable all the banks, any bank in the United States, not just the big ones, to offer instantly available funds and real-time payments to their customers.”
With the escalating global currency competition between the BRICS nations and the U.S., FedNow has the potential to become a game changer. The ease of transactions provided by FedNow could place it ahead of the yet-to-be-launched BRICS currency, posing a significant challenge to its global position.