BRICS: Prelude to Overthrow the US Dollar Hegemony

Source: Tongxuntong Research Institute
Guide

The BRICS member states discussed the “Building a unified payment system and digital currency between the five countries” at the recent annual summit of BRICS leaders. "Golden Brick Coin" Sword refers to overthrowing US dollar hegemony?

Summary

Special Topic: “Golden Bricks” not only breaks through the SWIFT monopoly, but also wants to be the break of “Dollar Hegemony”. The investment between the five BRICS countries accounts for more than 20% of the total global investment. A payment system that can guarantee the settlement and investment stability between BRICS countries is very important; the trade between BRICS countries is gradually de-dollarization; The currency has a relatively complete infrastructure, and the RMB cross-border payment system (CIPS) is eroding SWIFT's share of the international settlement business; blockchain technology has inherent advantages over SWIFT. The establishment of a blockchain-based payment system between BRICS countries will increase the financial independence of BRICS countries and the right to speak in the international economy, and become a prelude to overthrow the US dollar hegemony.

Quotes: shock down, build the bottom. This week, the ChaiNext Digital Asset 100 Index closed at 768.22 points, down 2.98%. ChaiNext Digital Assets 100X Index closed at 2035.17 points, down 1.78%. This week, the total market value of digital certificates was 236.28 billion US dollars, a decrease of about 2.6%; the average daily turnover was 68.48 billion US dollars, down 15.5%. The current price of BTC is $8,492, with a weekly decline of 3.6% and an average daily volume of $19.6 billion. ETH is currently trading at $180.5, with a weekly decline of 2.0% and an average daily volume of $7.96 billion. The exchange's BTC balance this week was 755,900, an increase of 5,208 from last week. The exchange's ETH balance was 8.665 million, an increase of 91,000 from last week. In the BICS secondary industry, the proportion of payment settlement market value decreased further.

Output and heat: BTC and ETH have experienced bottlenecks in growth. The difficulty of mining this week is 12.72T, which is not adjusted this week. The average daily power is 95.57EH/s, up 5.70EH/s from last week. The difficulty of mining this week is 2504, which is 63% higher than last week. The calculation power is 186.0TH/S, which is 0.4TH/S lower than last week.

Industry: Mining giants have listed in the US. Jianan Zhizhi will be listed on NASDAQ on November 20th, and will pass the Bitco mainland to the US IPO; Bakkt will provide BTC hosting services for institutional clients; the BRICS will discuss the possibility of issuing encryption certificates for the unified payment system; The Shanghai Mujin Rehabilitation Office launched the action of rectifying and rectifying the virtual currency exchanges within its jurisdiction.

Risk warning: regulatory policy risk, market volatility risk

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1 Topic : BRICS – Prelude to Overthrow the US Dollar Hegemony
The BRICS member states discussed the issue of a digital currency between the five countries at the recent annual summit of BRICS leaders, hoping to establish a unified payment system between the BRICS countries. This implementation is still to be developed in the “BRIC Five-country Digital Currency”.

Kirill Dmitriev, head of the Russian sovereign wealth fund “Russian Direct Investment Fund”, said that the major members of the BRICS countries expressed support for this idea. He pointed out that the development of a unified payment system will prevent BRICS from being exposed to the risks of global payment infrastructure while strengthening mutual economic cooperation.

1.1 BRICS: Global Economy Engine
The BRICS countries refer to the five major emerging market countries of Brazil, Russia, India, China and South Africa. With 60% of the world 's population and 23% of GDP , the BRICS have great potential for development and are among the fastest growing regions in the world. Against the backdrop of the global economic growth, several emerging market countries are constantly trying to implement new policies to promote regional integration and find new economic growth points.

The main cooperation methods among the BRICS countries include: integration of trade and investment, construction of regional development banks and currency reserves, construction of payment systems between countries/five countries, establishment of regional alliances, and cooperation with international organizations.

Integration of trade and investment. At the annual summit of BRICS leaders, China proposed that "protectionism and bullying countercurrents will have an impact on international trade and add downward pressure on the global economy." The BRICS countries can continue to deepen cooperation through free trade zones and preferential trade agreements.

Construction of a regional development bank. Although the BRICS countries have made certain achievements in economic development, they still have certain disadvantages in terms of finance. Development Banks are important supporters of infrastructure development in developing countries and need to continuously strengthen their hard power and asset reserves.

Building a payment system between the five countries. The BRICS countries need to develop their own monetary payment and settlement systems in bilateral/multilateral trade and reduce their dependence on developed countries' currencies.

Develop regional alliances . The BRICS countries are each important economies on their own continents, and they can form regional economic alliances centering on themselves, such as China's “One Belt, One Road” plan. As a representative of emerging economies, the BRICS can play a greater role in the international arena.

But the most important investment and payment system is monopolized by Western economies led by the United States. In the field of traditional financial cross-border payment and settlement, SWIFT (Global Interbank Financial and Telecommunications Association) has a monopoly position. The trade settlement between countries is almost inseparable from SWIFT. SWIFT has the ability to sanction an economy and sever its foreign trade. For example, Iran's foreign exchange settlement and commodity trading are currently being restricted by SWIFT. SWIFT is like a pair of invisible hands, holding the throat of the fate of developing countries.

1.2 BRICS: The break of the dollar hegemony?

Blockchain technology has become a powerful alternative to traditional inter-bank cross-border payment channels by virtue of its decentralized trust, efficient transaction settlement, and unchangeable account history. Founded in 1973, SWIFT has a series of problems such as low efficiency, long remittance time, and high friction costs. It is a product of the last era. On the other hand, the US dollar, which is the main settlement and reserve currency of international trade, has achieved economic hegemony by controlling the SWIFT system. An economy that does not comply with the wishes and interests of the United States may be subject to SWIFT sanctions, resulting in its inability to conduct international trade.

The establishment of a unified payment network in the BRICS countries is of great significance to financial stability. Dmitriev said that the investment between the BRICS countries accounts for more than 20% of the total global investment. A payment system that can guarantee the settlement and investment stability between BRICS countries is very important and can stimulate the use of member countries. Payment is made in the national currency to ensure sustainable investment among member countries.

Trade between BRICS countries is gradually de-dollarization. In the past five years, the share of the US dollar in foreign trade settlement has dropped from 92% to 50%. Russian Deputy Finance Minister Korechev said in November 2019 that the Russian central bank is adjusting its international reserve structure. The Russian Ministry of Finance plans to reduce the proportion of the US dollar in the National Welfare Fund by 2020, and consider adding RMB reserves. According to data from the Bank of Russia, as of October 2019, 13.4% of the Russian central bank's international reserve assets were located in China, and China became the foreign country with the most concentrated international reserve assets of the Russian central bank.

“Golden Bricks” has a relatively complete infrastructure. The RMB cross-border payment system (CIPS) is eroding the share of the SWIFT system in the international settlement business. According to the statistics of the central bank, there are currently 25 RMB clearing institutions in the world. The CIPS business covers 165 countries and regions. In the first three quarters of 2019, the cross-border payment of RMB exceeded 14 trillion, a year-on-year increase of 20%.

“Golden Bricks” is not only a breakthrough in SWIFT monopoly, but also a “breaker of dollar hegemony”. Judging from the attitude of the United States toward Libra, US legislators have neglected the positive factors such as blockchain technology and the efficiency gains that CBDC (central bank digital currency) may bring, and magnified some of the shortcomings of Libra. Libra's basket of currency reserves has shaken the dollar's position as a global reserve currency, but the US does not want the current dollar hegemony to be challenged. However, blockchain technology has inherent advantages over SWIFT and other wire transfer payment systems. In the long run, SWIFT's market share will inevitably be replaced by more regional digital payment systems, and the monopoly position will cease to exist. If the United States lags behind other economies in the world in CBDC competition, dollar hegemony will be weakened. According to statistics, the global central bank has reduced its holdings of US debt for half a year. At this point in time, the BRICS countries launched their own payment and settlement system, which is undoubtedly another heavy blow to the US dollar system.

1.3 Can the blockchain reshape the global financial discourse power?

The development of blockchain technology and the emergence of CBDC will reduce the influence of the dollar. After China indicated that it will vigorously develop blockchain technology, it is speculated that the People's Bank of China will launch the world's first central bank digital currency, while central banks such as Europe, Japan and Iran have plans to launch central bank CBDC. The Bank of England Governor has also urged recently. Global central banks should work together to create a multi-polar reserve currency system.

In the past few decades, whether it is the IMF, the World Bank or SWIFT, the foundation and voice of global finance are in the hands of Western economies. The total voting share of the IMF BRICS countries is less than 15%, and with the partners of the BRICS countries, the voting share has only increased by 1-2%. The BRICS League lacks the right to speak on the key decisions of the International Monetary Fund.

Although financial globalization and multi-polarization of the monetary system are still a difficult goal to achieve, the establishment of a payment system between BRICS countries can challenge the current situation. Payment tools based on blockchain technology can efficiently utilize resources within the BRICS countries, make resource transfer allocation more effective, reduce dependence on the US dollar system, and improve the financial independence of BRICS countries and the right to speak in the international economy. It will also become an important complement to the global financial system, making the global economy based on a more diversified and stable foundation.

2 market: shock down, build the bottom
2.1 Overall market: shock down, build the bottom

This week, the ChaiNext Digital Asset 100 Index closed at 768.22 points, down 2.98%. ChaiNext's digital asset 100X (no BTC) index closed at 2035.17 points, down 1.78%. The main circulation certificate is slightly stronger than the BTC.

The total market value of digital certificates this week was 236.28 billion US dollars, down 6.37 billion US dollars from last week, a drop of about 2.6%.

The average daily volume of digital passes this week was 68.48 billion US dollars, down 15.5% from last week. The average daily turnover rate was 28.1%, down 3.9% from last week. This week, the market continued to fall, the rebound was weak, and the trading volume was severely reduced.

The exchange's BTC balance this week was 755,900, an increase of 5,208 from last week. The exchange's ETH balance was 8.665 million, an increase of 91,000 from last week. Both the BTC and ETH balances of the exchanges increased slightly, and the selling pressure on the market increased.

The USDT market value was $4.114 billion, a decrease of $4.6 million from last week. The USDT premium rate has decreased slightly.

2.2 Core Pass: The main circulation certificate is more resistant to falling

The BTC is currently trading at $ 8492 , a weekly decline of 3.6% , and a monthly increase of 5.5% . The average daily turnover of BTC this week was $19.6 billion, and the average daily turnover was 12.4%. The BTC continued to fall this week and the rebound was weak. It may test the support of $8,200 again and gradually bottom out.

ETH is currently trading at $180.5, a weekly decline of 2.0%, and a monthly increase of 2.6%. The average daily trading volume of ETH this week was 7.96 billion US dollars, and the average daily turnover rate was 39.5%. ETH's trend this week is relatively stable, with a slightly smaller decline than BTC.

EOS is currently at $3.34, down 2.3% in the week and up 13.3% in the month. The average daily trading volume of EOS this week was 2.06 billion US dollars, and the average daily turnover rate was 63.1%. EOS remained strong after a sustained rebound.

The current price of XRP is 0.262 US dollars, with a weekly decline of 5.5% and a monthly decline of 8.1%. The average daily volume of XRP this week was 1.42 billion US dollars, and the average daily turnover rate was 12.0%. The XRP trend is weak.

The main volatility of the pass this week showed a downward trend except for a slight increase in BTC . BTC monthly volatility was 20.6%, up 0.2% from last week; ETH monthly volatility was 16.0%, down 0.9% from last week; EOS monthly volatility was 21.2%, down 0.5% from last week; XRP monthly volatility 15.9%, down 1.6% from last week.

2.3 BICS industry: the proportion of payment settlement market value further declines

In the secondary industry of the top five BICS (Blockchain Industry Classification Standard), the market value of the payment and settlement industry fell from 72.2% to 71.9%. From the change rate of market value, media content, physical objects The growth rate of market value of assets and information technology was relatively high, and the proportion of market value of public services and professional services declined significantly.

The BICS secondary industry, which has seen a significant increase in the number of certificates in this week, is the operating platform and media content, and the decline is more obvious for the project.

2.4 Market View: The cumulative negative bearish sentiment needs to be released

The BTC's support of $8,200 is facing a test, and the bearish sentiment accumulated in the market for a long time has to be released in a short period of time. At present, the futures market is relatively long and short, but the trend is still weak, indicating that the bulls are slightly weaker. However, the probability of a new low BTC is small, and it can still be strongly supported above the middle of 8,000 US dollars. The repeated shocks only constitute the bottom section. The main circulation certificate accumulated a certain increase in the early stage, beware of the callback.

The low position of BTC can be gradually added. In the long run, the quality pass has a large imagination, and it is still in the early stage of the bull market. The callback is a rare opportunity to increase the position. Investors can do a good job of asset allocation based on their own situation.

3 Output and heat: the growth of the mine currency
The difficulty of BTC mining has not been adjusted, and the computing power has increased slightly. The difficulty of mining this week is 12.72T, which is not adjusted this week. The average daily power is 95.57EH/s, up 5.70EH/s from last week. The difficulty of mining this week is 2504, which is 63% higher than last week. The calculation power is 186.0TH/S, which is 0.4TH/S lower than last week. Both BTC and ETH's computing power failed to break high, and the price fell, causing the growth of computing power to encounter bottlenecks.

This week, Google Trends's Bitcoin entry search heat was 9, and the Ethereum entry search heat was 6, which was the same as last week .

4 industry news: mining giants have listed in the US
4.1 Jia Nan Zhi Zhi will be listed on NASDAQ on November 21

Several sources confirmed to The Block that BTC mining machine manufacturer Jia Nan Zhizhi will ring the bell on Nasdaq on November 21. According to documents submitted by Jia Nan Zhizhi to the SEC, Jia Nan hopes to raise 0.9-110 million US dollars through IPO, which has shrunk by 75% from the previously announced US$400 million. However, it is still unclear the price range of its stock listing.

According to sources, Bitcoin has secretly submitted a prospectus to the SEC in late October, and plans to complete the listing in early 2020, raising at most $500 million, and the sponsor is Deutsche Bank. Bitcoin declined to comment on this news.

4.2 Bakkt will provide BTC hosting services to institutional clients

Golden Finance reported that Bakkt, a digital asset platform of the Intercontinental Exchange of the United States, announced on Monday that it will provide institutional customers with the Bitcoin hosting service "Bakkt Warehouse". Pantera Capital, Galaxy Digital and Tagomi have signed up to become the initial customers of the “Bakkt Warehouse”, and other “large enterprises” are expected to join in the next few weeks. This means that the New York Financial Services Department has granted the company an additional trust license.

4.3 BRICS discusses the possibility of issuing an encryption certificate for a unified payment system

Cointelegraph quoted Russian media RBC as saying that the BRICS countries (Brazil, Russia, India, China, South Africa) discussed the possibility of issuing a new cryptocurrency for the unified payment system at the recent BRICS Forum. Dmitriev, Director General of the Russian Direct Investment Fund (RDIF), pointed out that the BRICS payment system can stimulate domestic currency settlement services and ensure settlement and investment stability among member states.

4.4 Shanghai Mujin Remediation Office takes the lead in launching a rectification campaign for the virtual currency exchanges within the jurisdiction

澎湃News learned that under the leadership of the Shanghai Mutual Rehabilitation Office, the Municipal Financial Stability Joint Office and the Shanghai Headquarters of the People's Bank of China jointly issued the “Notice on Launching the Renovation of Virtual Currency Trading Places” to launch a virtual currency exchange within the jurisdiction. Rehabilitation. According to the notice, in the near future, with the promotion and promotion of blockchain technology, virtual currency speculation has shown signs of rising. In order to prevent the resurgence of resurgence, according to the relevant arrangements of the National Mutual Renovation Office, the district rectification offices are required to sort out the three virtual currency-related activities within the jurisdiction. And completed the work before November 22nd.