Introducing "The Unit" from the BRICS

The global financial landscape is undergoing a transformation with a concerted effort to reduce reliance on the U.S. dollar & establish an alternative infrastructure for international trade.

Introduction

The global financial landscape is undergoing a profound transformation, driven by the expansion of the BRICS bloc (Brazil, Russia, India, China, South Africa, and recently added members).

At the heart of this shift is a concerted effort to reduce reliance on the U.S. dollar and establish an alternative infrastructure for international trade.

Central to these discussions is the proposal of a new transactional instrument known as “The Unit”- a gold-backed, decentralized system designed to insulate member nations from geopolitical leverage and economic volatility.

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Current Geo-Political Situation surrounding the Dollar

For over 70 years, the U.S. dollar has served as the anchor of the global economy, accounting for roughly 58–60% of global foreign exchange reserves and facilitating nearly 90% of currency trading.

This dominance has historically provided the United States with what is often termed an “exorbitant privilege,” allowing it to borrow at lower costs and manage significant trade deficits.

However, recent geopolitical events have shifted the perception of the dollar from a neutral global public good to a tool of foreign policy.

The Erosion of Trust

The catalyst for the current acceleration toward de-dollarization was the response to the conflict in Ukraine. Following Russia’s invasion in 2022, the United States and its European allies froze approximately $300 billion of Russian central bank reserves invested in dollars and euros. This action, while intended as a sanction, sent a shockwave throughout the rest of the world.

It demonstrated that dollar-denominated assets were not merely economic stores of value but were conditional on political alignment with Washington.

• Political Motivations: The “weaponisation” of the dollar has forced nations to view currency diversity through the lens of national security. Countries such as Iran, Venezuela, and Afghanistan have faced similar sanctions, reinforcing the BRICS view that reliance on Western financial systems creates unacceptable vulnerabilities.

• Fiscal Instability: Beyond sanctions, there are growing concerns regarding the U.S. domestic economy. The rapid accumulation of U.S. public debt and persistent fiscal deficits have raised questions about the long-term stability of the dollar as a store of value.

• The “Rogue” Narrative: Critics within the BRICS bloc argue that the aggressive use of unilateral financial measures characterizes the U.S. and its allies as “rogue states” in the economic realm, disrespecting basic property rights and international trust.

Consequently, the search for alternatives is no longer purely economic; it is a strategic imperative to inoculate emerging economies against external foreign policy enforcement.

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Trading in Local Currencies

Before the establishment of a unified currency, the BRICS nations have aggressively pursued an intermediate strategy: settling trade in national currencies. This approach aims to bypass the dollar in bilateral transactions, thereby reducing transaction costs and political risks.

Expanding Bilateral Mechanisms

The use of local currencies within the bloc has surged.

• Russia and China: Trade between these two nations is now settled over 90% in rubles and yuan, serving as a proof-of-concept that large-scale non-dollar trade is operationally feasible.

• India and Energy: India has engaged in settling oil imports from Russia and the UAE using Indian rupees (INR) and Dirhams (AED), circumventing the petrodollar system.

• China and Brazil: In 2023, these nations struck a deal to settle trade directly in yuan and reais, shielding their exporters from dollar exchange rate volatility.

The Role of the New Development Bank (NDB)

The NDB, often called the “BRICS Bank,” plays a critical role in this transition.

The bank has committed to increasing its local currency lending to 30% of its total portfolio by 2026.

By issuing bonds and providing loans in the currencies of member states, the NDB facilitates the “de-domination” of the dollar in development finance, allowing borrowers to repay debts in the same currency they generate revenue in, thus mitigating exchange rate risks.

Limitations of Local Currency Trade

Despite these successes, trading in national currencies faces structural hurdles.

• The primary issue is the accumulation of illiquid assets. For example, if Russia exports oil to India and is paid in rupees, but imports little from India, it accumulates a surplus of rupees that are difficult to spend or convert globally.

• Without a common reference unit or a deep bond market for these currencies, surplus nations are wary of accumulating the currencies of deficit nations due to risks of depreciation and inconvertibility.

This limitation has driven the demand for a multilateral solution - “The Unit.”

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BRICS Introduces “The Unit”

The concept of a common BRICS currency has evolved from theoretical academic discussions to concrete proposals. Originally, Russian experts proposed the “R5” - named after the currencies of the five founding members: Real, Ruble, Rupee, Renminbi, and Rand. This concept has matured into “The Unit,” a project designed to address the imbalances of local currency trade.

• Launch Context: Reports indicate that “The Unit” has moved into a pilot phase as of October 2025, developed under the auspices of the International Research Institute for Advanced Systems (IRIAS).

• Symbolism: At the 2024 BRICS summit in Kazan, a symbolic banknote was unveiled, signaling the political will to move toward a unified settlement instrument, even if a physical retail currency remains distant.

• Objectives: The primary goal is not to replace national currencies for domestic use but to create a “problem-solving system” for cross-border settlements that solves the crisis of trust in the current dollar-based order.

What is The Unit?

“The Unit” is proposed not as a currency for everyday consumers (like the Euro for purchasing groceries), but as a distinct transactional instrument for states and major corporations.

• Nature: It is a digital, blockchain-based settlement unit. It functions as a supranational unit of account and a store of value for cross-border obligations.

• Composition: The intrinsic value of The Unit is anchored by a “40/60” rule. It is backed 40% by physical gold and 60% by a basket of national currencies from BRICS member states.

• Decentralization: Unlike the dollar, which is managed by the U.S. Federal Reserve, or the Euro, managed by the ECB, The Unit is designed to be apolitical. It operates on a distributed ledger where nodes can be managed by participating sovereigns or private agents, ensuring no single country can weaponize the system.

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Exploring The Unit in More Details

The technical architecture of The Unit addresses the specific flaws BRICS members identify in the Bretton Woods system.

The Gold Anchor

The decision to back the currency with 40% gold is strategic. Gold is the only globally recognized reserve asset that is not a liability of another sovereign nation.

• Removing Credit Risk: By tethering The Unit to gold, the system removes the credit risk associated with fiat currencies. This is crucial for building trust between BRICS members who may have disparate economic health and political rivalries.

• Volatility Dampening: While national currencies in the 60% basket may fluctuate, the substantial gold weighting stabilizes the unit’s value, making it a reliable instrument for long-term trade contracts (e.g., commodities).

The Fractal Architecture

The Unit utilizes a “fractal” architecture. This means the system is scalable and modular. New “nodes” can be set up by sovereign or private entities following a detailed rulebook. This allows the system to expand to new BRICS+ members without requiring a centralized overhaul of the entire network.

Governance and Management

Innovative proposals for The Unit’s governance include the use of Artificial Intelligence (AI) to manage the system. The Unit Foundation has reportedly appointed an AI executive to remove human error, corruption, and political pressure from decision-making, ensuring the currency remains a neutral arbiter of value.

Valuation and Settlement

The value of The Unit is recalibrated daily based on the market price of gold and the forex rates of the basket currencies. Transactions occur on a permissioned blockchain (such as the Cardano network mentioned in some reports), ensuring transparency and immutability. This allows members to settle trade imbalances (e.g., the Russia-India rupee surplus issue) by converting local currency surpluses into Units, which are a universally accepted store of value within the bloc.

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BRICS Pay & Digital Rails

For “The Unit” to function, it requires a technological delivery system. BRICS is actively building independent “digital rails” - separate from the Western-controlled SWIFT network.

BRICS Pay

BRICS Pay is a decentralized payment messaging system designed to be the successor or alternative to SWIFT.

• Functionality: It enables member states to make payments in their own local currencies while the system handles the messaging and conversion protocols in the background.

• Sovereignty: It operates without a central hub, meaning no single country can disconnect another from the network, directly addressing the risk of sanctions.

• Consumer Integration: While The Unit is for wholesale trade, BRICS Pay also targets retail, allowing citizens to use their domestic mobile wallets (like AliPay in China or UPI in India) across member nations.

Project mBridge and CBDCs

A critical component of this infrastructure is the use of Central Bank Digital Currencies (CBDCs).

• mBridge: This project, involving the central banks of China, the UAE, Thailand, and Hong Kong (and recently Saudi Arabia), facilitates instant cross-border transfers using CBDCs.

• Bypassing Correspondents: mBridge allows banks to transact directly with one another without relying on U.S. correspondent banks, thereby removing the U.S. from the settlement chain and reducing transaction times from days to seconds.

• Integration: The vision is for The Unit to eventually operate over these rails, with mBridge providing the ledger for holding and transferring the asset.

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Potential Impact on the World

If The Unit and its associated payment rails achieve scale, the implications for the global financial order would be seismic.

The Erosion of Dollar Dominance

While an overnight collapse of the dollar is unlikely, a successful BRICS currency would accelerate the transition to a multipolar monetary system.

• Reduced Dollar Demand: If major commodities like oil, gas, and rare earths are priced in Units rather than dollars, global demand for the dollar would decrease. This would weaken the “exorbitant privilege” that allows the U.S. to run massive deficits.

• Bifurcated System: The world could split into two distinct financial spheres: a Western dollar-based sphere and an Eastern commodity-backed sphere. This would insulate the Global South from U.S. interest rate shocks but could also reduce global economic efficiency.

A New Gold Standard?

The Unit represents a partial return to a gold standard. By actively using gold for trade settlement rather than just passive storage, BRICS could fundamentally alter the gold market, driving up demand and cementing gold’s role as the ultimate neutral asset in a fragmented world.

Empowerment of the Global South

A functional alternative system would give emerging economies leverage in negotiations with Western institutions. It would provide a safety valve against sanctions, encouraging more independent foreign policies among nations that previously felt compelled to align with the West to preserve market access.

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Challenges Faced by the Unit

Despite the ambition, significant obstacles stand in the way of The Unit displacing the dollar.

Geopolitical Rivalries

The BRICS bloc is not a cohesive political alliance.

• China-India Relations: The rivalry between the two largest members is intense. India has expressed reluctance to join an “anti-Western” alliance and is wary of any system that might ultimately be dominated by the Chinese Yuan. India has explicitly stated it has no policy to target the US dollar, favoring stability instead.

• Divergent Interests: Brazil and India are democracies with strong ties to the West, while Russia and Iran are under heavy sanctions. Aligning these disparate geopolitical interests into a single monetary union is difficult.

Economic Disparities

Member nations have vastly different economic structures. China is a manufacturing giant with a trade surplus; Russia and Brazil are commodity exporters; India is a service-heavy economy. A single currency policy (even a settlement unit) struggles to accommodate nations with different inflation rates, fiscal policies, and trade balances.

The Liquidity Trap

The U.S. dollar’s dominance is underpinned by the depth and liquidity of U.S. capital markets.

• Safe Assets: There is currently no BRICS equivalent to the U.S. Treasury bond - a highly liquid, so-called “safe” asset that investors can buy and sell instantly in massive quantities.

• Convertibility: The Chinese Yuan, the heavyweight currency in the basket, is still subject to capital controls. For The Unit to be trusted globally, it requires free convertibility, which contradicts China’s current monetary policy.

Western Retaliation

The U.S. has signaled it will not passively accept the displacement of the dollar. President Donald Trump has threatened 100% tariffs on any nation that attempts to replace the U.S. dollar with a BRICS currency, effectively putting a high price tag on de-dollarization for nations dependent on U.S. consumer markets.

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Conclusion

The introduction of “The Unit” marks a pivotal moment in the evolution of global finance, signaling a determined shift by the Global South to construct a financial architecture immune to Western sanctions.

• By combining gold-backed stability with digital rails like BRICS Pay, the bloc is moving beyond rhetoric toward a tangible alternative to the U.S. dollar.

• However, deep internal rivalries between China and India, the lack of liquid capital markets, and the sheer inertia of the dollar system present formidable hurdles.

While unlikely to dethrone the dollar in the short term, The Unit lays the groundwork for a bifurcated, multipolar monetary system where the dollar is no longer the sole arbiter of global trade.

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