BRICS missed a ‘massive' opportunity in its efforts to dethrone the dollar - Ken Olling
|Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day's top stories directly to your inbox. Sign up here!|
(Kitco News) Adding more members to the BRICS bloc could lead to "fragmentation" and pose a serious impediment to the creation of a common currency down the road, according to Ken Olling, Founder and CEO of MELD.
Following much speculation prior to the BRICS summit that took place August 22-24 in South Africa, the finance ministers and central banks of the BRICS members received instructions to look at a common currency and make this a priority for next year's summit. Russia is hosting the meeting in Kazan in October 2024.
"There was an appetite in the global economy for something that could compete. But they weren't ready to commit to something that bold just yet," Olling told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
The announcement about next year was a "missed opportunity." With six new additional members looking to join come January 1, 2024 — Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia — the process of launching a common currency at a later stage would be much more complicated due to lack of agreement, Olling explained.
"They missed a massive opportunity to point their compass in a specific direction," Olling said. "Had they come together and had [at least] some strong statement towards a single currency, it would have been a very strong message."
Instead, the countries focused on doing more trade in local currency, which is a much lighter version of the de-dollarization trend.
"The BRICS had the potential to be a counterweight from a currency perspective to the World Bank and the IMF," Olling said. "[But] it was very much in the opposite direction — direction of fragmentation as opposed to centralization. They are still moving away from the dollar, but I would see it as de-dollarization that is most friendly to the dollar."
Olling stated that the big winner from the BRICS summit was not the bloc itself, not the U.S. dollar, but this asset. To find out what it is, watch the video above.
With the BRICS more than doubling in size and some new members still having close ties to the U.S., the decision-making process will become much slower.
"It's going to become more politicized than it was with the core BRICS," Olling said. "I don't have that much faith that if you're talking about a large international organization, adding more members equals the ability to make more decisive decisions."
The de-dollarization trend will continue, but at a slower pace and in a less lethal form to the U.S., Olling added.
"BRICS will definitely undermine the dollar to some degree, but it's not going to prove to be the answer to the dollar," he noted.
Olling also addressed what Western central bankers might be thinking about the BRICS expansion following the Jackson Hole summit, watch the video above to get more insight.
What is MELD, and why does the de-dollarization trend benefit crypto?
The move away from the dollar is a positive growth driver for the crypto space and companies like MELD, Olling said.
"As you see countries and people understanding monetary policy better, they become much more aware of how the money supply works, and they want to have an alternative towards that," Olling said. "So you've seen this in the amount of people that hold cryptocurrency. The fact that the BRICS didn't come up with a new alternative currency means that Bitcoin now has a much bigger potential."
Olling described MELD as benefiting from this diversification into alternative assets like Bitcoin.
MELD is a non-custodial liquidity protocol that allows users to borrow fiat against their crypto assets and then earn a yield on their deposits. It offers cross-chain lending, borrowing, staking, and integrated fiat banking services.
"On the crypto side, the non-custodial part comes in when you're talking about your account that you have access to your assets on where you can buy and sell and trade on that account.
The only person that has access to that account is you," Olling said. "Then, on the fiat side, we have a license that is connected to an electronic money institution. So we will be able to take deposits. Those deposits are held by the central bank. We're only a facilitator in being able to move money around. We can't actually do anything with it."
To learn more about MELD, potential risks, or additional pros and cons, watch the video above.