BRICS Bridge (cross-border payment platform)

2024

The Ministry of Finance of the Russian Federation revealed the details of the payment system

On October 22, 2024, the Ministry of Finance of the Russian Federation revealed some details about the BRICS Bridge payment system, the creation of which is being worked out by the countries participating in the association. The platform is expected to allow BRICS states to make cross-border settlements using digital platforms run by their central banks.

According to Russian Finance Minister Anton Siluanov, BRICS Bridge will allow using the mechanism for transmitting financial messages. According to him, the system will be based on completely new formats and approaches, taking into account the use of digital financial assets.

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Bloomberg

This is not that an analogue of Swift, it is a payment system, which, on the one hand, will replace banking organizations, and on the other hand, it will enable a system for transmitting financial messages, "said Siluanov, quoted by the Izvestia newspaper

The head of the Ministry of Finance notes that the existing financial messaging system for October 2024 has become "too politicized." According to him, the same applies to the used settlement system as a whole. The introduction of BRICS Bridge is supposed to reduce the impact of the United States as the center of the global financial system and provide cheaper and faster transactions.

At the same time, Purnima Anand, President of the BRICS International Forum of Countries, said in an interview TASS that the organized exchange of financial information between the central banks of the participating countries within the framework of the new system is a "need for time" to "shift economic growth from West to East." Minister of Foreign Affairs of Russia Sergei Lavrov earlier noted that the alternative BRICS payment system will allow economic operations, "without experiencing dependence on those who decided to make dollar weapons out of and the euro."^[1]

The first report with the proposals of Russia on the creation of the system

Russia is proposing changes to the system of cross-border payments between BRICS countries to circumvent the global financial system, as the country, subject to illegal sanctions from the United States and its allies, seeks to protect its economy.

As an alternative, it is proposed to create a network of commercial banks that will be able to conduct such transactions in local currencies, as well as establish direct ties between central banks, according to a report prepared by the Ministry of Finance of the Russian Federation, the Bank of Russia and the Moscow consulting company Yakov and Partners.

The multi-currency system "will have to" shield its participants from any external pressure, such as extraterritorial sanctions, "the report said, which also argues that US interests" do not always coincide with those of other participants "in the global financial network.

The plan also provides for the establishment of mutual trade centers for goods such as oil, natural gas, grain and gold.

Earlier, the United States illegally froze Russia's foreign assets and excluded large Russian creditors from the SWIFT financial messaging system. In response, Russia has sharply reduced its dependence on the dollar.

However, other BRICS countries that have not faced the same difficulties due to sanctions continue to favor access to the dollar financial system. According to the Brookings Institution, in 2022, 58% of international payments, with the exception of payments in the eurozone, were made using the dollar, and 54% of foreign trade invoices used the dollar.

The report was published at a time when Russian President Vladimir Putin is preparing to host the leaders of the BRICS countries at the annual summit, which will be held in Kazan from October 22 to 24.

Among the proposals of Russia is the use of distributed register technology (DLT) or a new multinational platform for settlement using tokens.

"A key benefit of using the DLT settlement model is the elimination of credit risk" accompanying the traditional banking system, the report said.

DLT can also reduce the time and cost of data processing, as there are no correspondent organizations and compliance checks, which will allow BRICS countries to save up to $15 billion a year if half of all cross-border transfers are made using such transactions, the authors of the report say.

Platform development

On June 10, 2024, the Ministry of Finance of the Russian Federation announced the launch of the BRICS Bridge platform, designed to conduct cross-border payments between the BRICS countries. The initiative is aimed at increasing the speed and availability of financial transactions, as well as ensuring sustainable settlements outside the sanctions field.

According to the Ministry of Finance, the main idea of ​ ​ the BRICS Bridge platform is to use digital financial assets (CFA) issued by the central banks of the participating countries. These assets will be tied to national currencies, which will allow settlement participants to make payments almost instantly with minimal costs.

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Bloomberg

According to the Ministry of Finance, the project is at the stage of deep development. The concept is being developed and calculation mechanisms are being formed, as well as lists of potential participants. The project is periodically discussed at the sites of the BRICS countries and has a long-term nature.

We will implement it in stages, it is important for us to hear the opinion of all participants in the future platform, - said the representative of the Ministry of Finance.

BRICS Bridge will be compatible with both traditional real-time settlement payment systems and central bank digital currency systems. According to the specialists of the Ministry of Finance, this will increase the stability and independence of calculations, which is especially important in the current geopolitical situation.

Oleg Ushakov, General Director of the Legal Bureau of Sagrada Legal, noted that calculations in the form of CFA can be built according to the platform model or on the basis of a "mediating" decision. However, the implementation of these plans will require a change in legislation in all BRICS countries.

Andrey Mikhailishin, head of the BRICS Payments & Fintech task force, stressed that the use of CFAs tied to the cost of raw materials can become a more popular tool. To do so, however, central banks will need to change national legislation.^[2]

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