What is R5? The New BRICS Currency Already Underway

R5 currency from BRICS

You may be hearing a lot of talk about a new BRICS currency or even some mysterious unknown currency called “R5”.  Well, these are both one and the same, so if you’re wondering what R5 currency is (and where to get some), well it’s still a hypothetical currency in some nebulous degree of development.  Technically speaking, BRICS – being the economic partnership between Brazil, Russia, India, China, South Africa, and a handful of informal members – hasn’t announced the development of its common currency. But there is a name on the table:  R5.  The name comes from the amazing coincidence that all of the members of BRICS use currencies beginning with the letter R:  Renminbi, Ruble, Rupee, Real and Rand.

So with a name in place, and some clear moves by the bloc to undermine the U.S. dollar, it’s easy to see how the pathway to the R5 is currently being paved.  The “R5” itself may never materialize, but a BRICS currency of some kind, even if it’s a switch to an existing one such as the Chinese yuan, seems an inevitable part of the BRICS showdown with the dollar.

The development of a common currency between the BRICS member states has been called for most by Russia and China. Having a common currency between member states would enable easier trading, and, importantly, enable countries to bypass the SWIFT banking system used to impose banking sanctions on countries acting against Western interests.

To progress toward that goal without having to wait for a new currency to be outlined, the members of BRICS are together working to increase their internal trading to build a foundation of shared economic stability that is less vulnerable to external powers. The amount of trading between BRICS members is currently about 30-35%, and each member state is pushing to increase it.

Aside from driving up their internal trading, the members of BRICS are moving full-steam ahead on to the development of central bank digital currencies (CBDCs). Russia, India, and China have each launched trials of their own CBDCs based on their national currencies; once in place, the technological infrastructure will enable easy piggybacking for a common currency such as the R5 (when, and if, it launches).

As Russia, India, and China develop the technology to integrate CBDCs into their financial systems, they will certainly share it with their vast networks of trading partners outside of BRICS to facilitate economic movement. Brazil’s Mercosur network, Russia’s relationships with the EAEU and CIS, India’s role in SAARC, China’s membership in the RCEP, and South Africa’s place in the SAEU – combined with Russia, India, and China’s role in the Shanghai Cooperation Organisation – means that 64 additional countries will have access to similar digital currency systems. Inter-system compatibility would be a sure thing.

Because of this, even before the R5 launches, BRICS members will be able to achieve the primary goal of Russia and China in wanting to establish a BRICS common currency: conducting financial business outside of SWIFT.

As such, in some ways, the existence of technologies that enable the establishment of digital currencies sidesteps the need for a traditional common currency. In its place, electronic systems that can instantly convert currencies such as the Renminbi, Ruble, Rupee, Real and Rand from one to the other fulfill the role of universal trading without SWIFT oversight.  How and if that develops remains to be seen, but in the meantime, BRICS is going all-in on rapidly developing a new and interconnected digital trading sphere.

That’s not to say that there is no advantage to the development of the R5 common currency, and why it’s reasonable to expect that it is still in the pipeline. If the members of BRICS unify their economies under a shared currency in the same way that the EU did, they will be creating a bona fide economic partnership that ties together the member states in their collective stability and global bargaining power.  BRICS is also getting bigger and stronger in 2024 with the announcement of six new nations joining the group.  These new countries don’t follow the R-name currency pattern of original BRICS (for example, Ethiopia uses a birr), but the R5 name is likely to stick, at least colloquially if not officially, while we wait and see what BRICS+ does moving forward.

2023, brics, Featured