The BRICS are supporting a project called "The Unit" - a gold-backed digital asset designed as a medium of exchange for cross-border trade to reduce reliance on the US dollar.
From The Unit's official Litepaper:
The UNIT is a new digital monetary concept that combines the advantages of decentralized blockchain technology with the intrinsic value of gold and the historical usability of traditional currencies.
While it's not an official BRICS-wide initiative (it was developed by the International Reserve and Investment Asset System), it has been advanced through BRICS discussions.
The Unit is primarily designed for use by governments, central banks, and large corporations, rather than everyday citizens.
Last year, we covered the BRICS' plan to launch an alternative to the US dollar payment system, and The Unit appears to be part of its implementation.
Gold Backing
Backed by a structure of 40% gold and 60% BRICS+ currencies, The Unit's intrinsic value is derived from the current value of the basket of underlying assets.
CBDC Comparison
The Unit differs from a Central Bank Digital Currency in a few ways:
- Decentralised through use of distributed ledger technology (Cardano)
- Its value is anchored in 40% gold and 60% BRICS+ currencies
- It is fully fungible
Counterparty Risk
Similar to asset-backed stablecoins, the Unit would introduce counterparty risk (the probability that another party may not fulfill its part of the deal and may default on contractual obligations).
In other words, we would need to trust a third-party to custody the physical gold and the BRICS currencies for The Unit to function. On the other hand, cryptocurrencies like Bitcoin, Litecoin, and Ethereum carry no counterparty risk.
Until next time...
As US debt enters further into unsustainable territory, the trend towards de-dollarization is accelerating.
Considering the bureaucracy and delays behind nation-backed digital tokens like The Unit, free-market cryptocurrencies - for everyday citizens - that are already growing in usage are likely to be the ultimate winners here.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the Hive blockchain. You can also follow me on InLeo for more frequent updates.
Sources
Unit Foundation Website [1]
Unit Foundation FAQ [2]
BRICS Logo [3]
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