Will the Ambitious Plan by BRICS for Blockchain-Based Payment System Succeed?

Kremlin is planning an establishment of a blockchain-based payment system within the BRICS nations. Yury Ushakov, an advisor to the Kremlin,ponted out the importance of this autonomous payment system, leveraging technologies such as blockchain and digital currencies. The move is focused at creating a reliable, apolitical, and practical payment infrastructure for governments, businesses, and individuals.

Ushakov asserted that the main objective in the following year would be to bolster the BRICS nations’ standing in the global financial and monetary system. Referring to the 2023 Johannesburg Declaration, he highlighted the leaders’ commitment to prioritize national currency settlements and strengthen correspondent banking networks. The focus remains on fortifying the Contingent Reserve Arrangement, particularly diversifying from the dominance of the US dollar.

A Look At BRIC’s Countries Crypto Regulatory Situation

Brazil’s Crypto Regulatory Landscape: A Prelude to BRICS’s Move

Before delving into the specifics of BRICS’s initiative, it’s crucial to understand the varied regulatory environments within the member nations. Brazil, for instance, underwent a significant transformation with the enactment of Law No 14,478/22, the Brazilian Virtual Assets Law. This legislation, effective since June 2023, marked a pivotal shift from the previously unregulated status, providing a legal framework for crypto and virtual assets.

Presidential Decree No 11,563/23 designated the Central Bank of Brazil (BACEN) as the key regulatory authority for virtual assets, excluding tokenized currencies and Central Bank Digital Currencies (CBDCs). The Brazilian Virtual Assets Law has set the stage for regulatory guidance from both BACEN and the Brazilian Securities Commission (CVM), with a focus on securities classified as “tokens of receivables” or “fixed income tokens.”

Russia’s Crypto Laws

Russia, another BRICS member, has been navigating the crypto landscape with distinctive regulations. Vladimir Putin’s approval of the Digital Financial Assets (DFA) legislation in July 2020 marked a milestone, legalizing cryptocurrency transactions while restricting their use as payment for goods and services. The stringent reporting requirements and supervision by the Bank of Russia illustrate a comprehensive approach toward ensuring transparency and compliance.

The legislation defines cryptocurrency as “an aggregate of electronic data capable of being accepted as the payment means,” emphasizing its role as an investment rather than a medium of exchange. The obligation for individuals and corporations to report transactions above a certain threshold to tax authorities reflects a commitment to prevent unlawful activities, including money laundering.

China’s Crypto Laws

China’s proactive stance on blockchain development aligns with the broader vision of BRICS. The government’s encouragement of blockchain technology in 2019 and the passage of cryptographic legislation in 2020 showcased a strategic move toward embracing digital innovations. However, the ban on initial coin offerings (ICOs) in 2017 demonstrated a cautious approach to prevent illicit fundraising.

China’s regulatory framework distinguishes between the acceptance of blockchain technology and the prohibition of certain crypto-related activities. While ICOs are outlawed, the possession of cryptocurrencies is generally lawful. The government’s recognition of cryptocurrencies as virtual commodities, despite restrictions on token financing and trading platforms, indicates a nuanced perspective.

India’s Cryptocurrency Landscape

India’s stance on cryptocurrencies remains in flux, with ongoing debates and regulatory developments. The absence of a central regulatory body overseeing cryptocurrency payments adds a layer of uncertainty for investors and businesses. Finance Minister Nirmala Sitharaman’s advocacy for taxing digital assets reflects a recognition of the industry’s economic significance.

While the Reserve Bank of India and government spokespersons have declared bitcoin as unlawful but not banned, the taxation framework introduced in Union Budget 2022 adds complexity. Cryptocurrency earnings are taxed at 30%, with a 1% TDS deduction, highlighting the government’s attempt to bring a degree of clarity to the sector. However, the future of cryptocurrency in India remains in the hands of the proposed Cryptocurrency Bill 2021, aimed at regulating the burgeoning industry.

South Africa’s Crypto Approach

In contrast to the uncertainty in India, South Africa has embraced a favorable regulatory framework for cryptocurrencies. Multiple Financial Sector Conduct Authority (FSCA)-regulated exchanges and platforms operate within a legal framework. The recognition of crypto assets as “a digital representation of value” by the FSCA in 2022, subject to regulatory rules, reflects a proactive approach to safeguard investors.

The introduction of rules by the South African Advertising Regulatory Board in January 2023, requiring explicit warnings about potential financial losses in crypto asset advertisements, demonstrates a commitment to consumer protection. Additionally, the taxation of cryptocurrency earnings in South Africa further legitimizes the industry, with the South African Revenue Service (SARS) taxing gains and losses based on income tax bands.

BRICS’s Future

As BRICS nations embark on the journey to establish a blockchain-based payment system, the diverse regulatory landscapes within member countries offer valuable insights. While Brazil and South Africa have embraced regulations to provide legal clarity, Russia and China have navigated a more controlled approach, ensuring transparency and compliance.

BRICS’s ambitious plan to launch a blockchain-based payment system signifies a collective vision to harness the potential of digital technologies for financial empowerment. The varying regulatory approaches within member nations highlight the need for a harmonized framework to facilitate seamless collaboration. As BRICS forges ahead, the world watches with anticipation to witness the evolution of this groundbreaking initiative, poised to reshape the global financial landscape.