BRICS and CBDC: What it is and why India wants to connect central bank digital currencies

The Reserve Bank of India is promoting an ambitious initiative that could transform international trade among BRICS nations. The core proposal involves creating a link between central bank digital currencies – but what exactly is CBDC and why does it matter?

Understanding CBDC: What is a central bank digital currency

CBDC stands for Central Bank Digital Currency, or officially issued digital currency by a central bank. Unlike decentralized cryptocurrencies, a CBDC is a digital representation of a country’s fiat currency, maintaining control and security under the responsibility of monetary authorities. Basically, it is the money you use today – real, dollar, yuan – but in a completely digital format.

RBI’s ambitious plan to integrate BRICS

The Reserve Bank of India is urging the government to include in the agenda of the 2026 BRICS summit, which will be hosted in the country, a proposal to create an interconnected system of CBDCs among the members. This would be the first formal attempt of its kind, bringing together Brazil, Russia, India, China, South Africa, and new members such as the United Arab Emirates, Iran, and Indonesia around shared digital infrastructure.

The goal of this link is twofold: on one hand, it aims to significantly facilitate cross-border trade and tourism among the nations, reducing costs and intermediaries. On the other hand, it seeks to gradually reduce dependence on the US dollar in international transactions, promoting greater financial autonomy for the bloc.

Varying progress of CBDCs among BRICS members

Although no BRICS country has fully implemented its CBDC, all are conducting pilot programs. India has already made considerable progress with its e-rupee, launched in December 2022, which has attracted approximately 7 million users in the retail segment. The Indian central bank has been promoting adoption through offline payments, programmable incentives, and partnerships with fintech wallets.

China, in turn, has promised to expand the global reach of its digital yuan and is allowing commercial banks to offer interest on digital yuan holdings, signaling expansion of functionalities.

Geopolitical context and trade tensions in the background

The timing of this proposal coincides with rising trade tensions between the United States and India. Recently, the country faced significant tariffs on its exports, particularly in textiles, gemstones, and chemicals, accompanied by threats of even higher penalties. Bilateral trade negotiations remain stalled, harming Indian exporters.

Meanwhile, Washington has repeatedly warned BRICS nations against any attempt to replace the dollar, threatening tariff penalties. In response to this pressure, creating a CBDC link among the bloc represents a strategic move to strengthen financial autonomy and reduce vulnerability to external monetary pressures.

The BRICS initiative around CBDC encapsulates both aspirations for greater economic integration and the search for alternatives to the dollar-centered international financial system.