By establishing a new reserve currency, China and Russia are preparing a challenge to the hegemony

Along with China and the other BRICS countries, Russia is prepared to create a new global reserve currency that may potentially threaten the supremacy of the US dollar.

The new reserve currency, which would be based on a basket of the currencies of the group's members Brazil, Russia, India, China, and South Africa, was hinted to by President Vladimir Putin.

Putin stated at the BRICS Business Forum on Wednesday that “the issue of developing the international reserve currency based on the basket of currencies of our nations is under discussion.” “We are prepared to work honestly with any ethical partners.”

Although the dollar has long been considered the world's reserve currency, its supremacy in terms of the proportion of global currency reserves is dwindling. According to the International Monetary Fund, central banks are attempting to diversify their holdings by including both conventional assets like the Swedish krona and the South Korean won as well as non-traditional ones like the yuan.

The IMF's perceived US predominance is being addressed, according to ING's global head of markets Chris Turner, who stated as much in a note. It will enable the BRICS to create their own economic system and currency inside that system.

Following Western sanctions over the Ukraine war that effectively locked the nation out of the global financial system and restricted access to its money, Russia made this action.

According to ING's Turner, the speed with which Western countries and their allies sanctioned Russia's foreign exchange holdings (freezing around half) “no doubt astonished Russian officials.”

He said, The Central Bank of Russia essentially acknowledged as much, and no doubt certain BRICS nations — particularly China — took notice of the speed and covertness with which the US Treasury moved.

According to Turner, the restrictions have probably prompted Beijing and Moscow to develop a substitute for the special drawing rights, the IMF's international reserve asset.

The SDR is based on a basket of currencies that includes the US dollar, the euro, the British pound, the Japanese yen, and China's yuan, albeit it is not a reserve currency.

He indicated that one option is that the BRICS basket currency may draw reserves from nations that are currently within their sphere of influence in addition to the group's members. These include states in the Middle East and South Asia.

Thanks to assistance from the central bank, Russia's currency, the ruble, has recovered to levels above those of the pre-war period after falling by 70% in less than two weeks following the invasion of Ukraine. To 1.87 cents, it has increased 15.2 percent in June. In the meanwhile, the yuan has remained stable over the same