US Positioning on Crypto Currency has implications for BRICS and South Asia
With the Ukraine war and the resulting sanctions making it difficult for Russia to trade with its allies, being barred from using SWIFT or the US dollar, it resulted in Russia resorting to local currencies to trade that resulted in the BRICS currency drawing adverse attention in Washington and gaining global imprtance.
Aug 18, 2025
In recent months policy discussions have focused on the United States’ increasingly assertive trade policies and their impact on global supply chains and economic stability. A new dimension in this debate is the rise of US dollar-pegged stablecoins and the digital financial infrastructure that supports them. The Trump administration’s promotion of crypto assets and US dollar-pegged stablecoins, combined with regulatory moves in Singapore ,SouthKorea and Hong Kong, have generated worldwide interest. Stablecoins are digital tokens pegged to another asset, often a sovereign currency. US dollar-pegged stablecoins, are backed one-to-one with dollars or liquid dollar assets and are redeemable at face value despite their occasional deviation from the currency peg.They are considered as near-cash equivalents — programmable, transferable and globally accessible. These tokens are widely used for settling crypto asset trades, facilitating international remittances,an important source of foreign earnings for South Asia and providing a dollar alternative in some developing economies. Their 24/7 transferability, near-instant settlement and low transaction costs also make them attractive for foreign exchange transactions.
The autonomy enjoyed by crypto asset issuers raises concerns for monetary policy transmission.where a person with a smartphone can transact in dollar-pegged tokens without interacting with the US or any banking system. In times of stress, mass redemptions could trigger run on treasuries, destabilising short-term funding markets, weakening the tools of monetary authorities and potentially spreading shocks across global financial markets.The stablecoin market presently is estimated to be around US$250 billion, backed by roughly US$180 billion in US Treasuries and other short-term liquid assets.[i]
The recent legislation called “Guiding and Establishing National Innovation for US Stablecoins of 2025” or the GENIUS Act of 2025 marks the beginning of the United States' first major legislative step towards regulating stablecoins. With this bill, the US joins a growing list of countries seeking to bring oversight and stability to the rapidly expanding digital asset ecosystem. This act aims to provide clear regulatory framework for the crypto industry.[ii]
The risk of the crypto industry comes from the business model which it follows. Such a business model essentially involves the capture of the spread between what the stable coin issuers pay on their currencies (which is zero interest under the GENIUS Act) and what they can receive in returns when they invest their reserves, just like a bank. Major incentives for stablecoin issuers are prompted by their propensity to invest at least some of their reserves in riskier assets to get higher returns. Such investments could be a major source of vulnerability, particularly when issuers are licensed by state authorities. Critics have pointed out that from a systemic perspective, the GENIUS Act’s main shortcoming is its failure to deal effectively with the inherent risk of stablecoin runs when there is a crisis of confidence in the crypto system, because it prevents regulators from prescribing strong capital, liquidity, and other safeguards.[iii]
Perceived Challenge from BRICS nations
The GENIUS Act 2025 must be seen in the context of not only establishing the legal legitimacy of the crypto industry but the global context of establishing the reserve status of the US dollar which has been increasingly challenged by certain countries. The BRICS group of nations got directly involved in the US trade war with imposition of high tariifs on imports from Brazil and India, countries that were accused of pursuing "anti-American" policies due to their growing trade relations with China and Russia.[iv] The status of the US dollar as a world reserve currency became an integral part of the trade war discourse with the US President Donald Trump accusing the BRICS nations as trying to replace the dollar with another reserve currency.
In November 2024, BRICS countries held their 16th summit in the Russian city of Kazan. The BRICS group currently consists of 10 member countries: the original five -Brazil, Russia, India, China, and South Africa and five new members admitted in 2024-25 -Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates, with Indonesia joining in early 2025. In its joint declaration at the end of the summit, BRICS members encouraged the “strengthening of correspondent banking networks within BRICS and enabling settlements in local currencies in line with BRICS Cross-Border Payments Initiative (BCBPI).” This initiative, also known as BRICS Pay, is a decentralised and independent payment messaging mechanism system for BRICS nations to trade with each other through their own currencies. BRICS Pay was first proposed in 2018 as a way for the developing nations to better trade with each other.
However, it was during the summit in 2022 that BRICS Pay came to be seen as a possibility to bypass the SWIFT network, the internationally recognised standard of global banking transactions and one of the main pillars of Western sanctions against Russia. With the Ukraine war and the resulting sanctions making it difficult for Russia to trade with its allies, being barred from using SWIFT or the US dollar, it resulted in Russia resorting to local currencies to trade that resulted in the BRICS currency drawing adverse attention in Washington and gaining global imprtance.[v]
THE CBDC Concept
In recent years another move has been to try out the concept the Central Bank Digital Currency (CBDC) which the US has rejected as a part of its digital financial infrastructure. At present 137 countries and currency unions, representing 98% of global GDP, are exploring a CBDC. In May 2020 that number was only 35. Currently, 72 countries are in the advanced phase of exploration—development, pilot, or launch[vi] . The pilot program launched in India has approximately five million CBDC users and 16 banks participating in the expansion of this process. While there has been some progress in the CBDC space, with fintech companies integrating e-rupee and another party closing the first all-e-rupee deal in India, worth $3.5 million,19 there has been a slowdown in the expected progress of CBDCs.
Recognizing the potential ramifications for end-users, the Reserve Bank of India has adopted a phased approach to the CBDC rollout, prioritizing a thorough assessment of its impact before proceeding with a complete national launch.There are some important factors contributing to a perceived stagnation in its progress. The dominant presence of the UPI poses a significant challenge. The UPI’s rapid adoption and widespread utilization,with its real-time payment capabilities and seamless interoperability across banking institutions achieving an 83% share of total payment volume by 2024 — an increase from 34% in 2019 . The key distinction between the two is that CBDC is a legal tender, similar to physical currency, while the UPI is a mode of payment that facilitates interbank transactions. Although both serve similar purposes of digital financial transactions, the UPI focuses on facilitating fast and efficient quick transfers for smaller, retail-driven payments, whereas CBDC is designed to enhance security and enable tracking of monetary transactions, including large transactions.India’s introduction of a CBDC exhibits a potential towards a more transparent and efficient digital financial infrastructure. However, realizing the full potential of CBDC necessitates addressing critical challenges.notably data privacy concerns, robust cybersecurity frameworks, the competitive landscape — dominated by established platforms such as the UPI — and comprehensive public education on its use-cases which will be required to be addressed ahead of wider adoption or scaling of CBDC..[vii]
Crypto Currency in South Asia
On crypto currencies, it has been reported that India is currently working on a discussion paper and an inter- ministerial group (IMG) comprising officials from regulators is examining issues concerned with crypto because of its implications on financial stability and monetary policy.The Supreme Court of India recently asked the government to formulate a clear-cut policy on regulating cryptocurrency, while underlining its impact on the economy[viii]I
In other countries of South Asia, Pakistan has formally enacted its first law to regulate virtual assets, establishing a federal authority to license and oversee crypto-related businesses.The Virtual Assets Act, 2025 creates the Pakistan Virtual Asset Regulatory Authority (PVARA), a new autonomous regulator to supervise the virtual asset economy, ensure compliance with global anti-money laundering standards and support financial innovation through regulatory overview [ix]
In Sri Lanka, an increasing number of citizens are turning to cryptocurrencies like Tether (USDT) to safeguard their wealth. Unlike traditional savings, which steadily lose value alongside the weakening currency and inflation, these digital assets – pegged to the US Dollar – are perceived to offer a sense of stability. The transactions take place through platforms such as Binance by converting Sri Lankan rupees into crypto which are later sold for profit via local bank transfers that effectively mask the transaction’s crypto origins from financial institutions. [x]
In Bangladesh, officially, the government has restricted the use of crypto currencies for transactions due to concerns over money laundering and unregulated trade. Despite this, there is reported to be a thriving underground market where individuals regularly engage in cryptocurrency trading, largely unnoticed by the authorities[xi]
Regulatory hurdles, however, remain. In Nepal as Nepal's Foreign Exchange (Regulation) Act, 1962, currently bans cryptocurrency transactions, including mining. As such the government is now weighing the pros and cons of revising these laws to allow regulated crypto activities while maintaining financial stability.[xii]
Bhutan began mining Bitcoin as early as 2018, viewing it as a store of value similar to gold or property. Over the years, Bitcoin has emerged as an asset class. According to cryptocurrency platform Arkham, crypto portfolio surged to $1.2 billion by the end of 2024 .[xiii]
The US having set the template for legislative regulation of the crypto industry and with the CBDC project being given a go-by, it remains to be seen what the rest of the world does. Certainly, crypto currencies are here to stay and South Asia will have to chart its course carefully, learning from the lessons of other geographies.
References:
[i] Shirai SayuriCan stablecoins extend US dollar dominance? East Asia Forum] August 9 2025 mg.eastasiaforum.org
[ii] https://www.weforum.org/stories/2025/07/stablecoin-regulation-genius-act/july 29.2025
[iii] John son SimonThe Crypto Crises Are Coming
[iv]McGeever James Could Trump tariffs become BRIC-building blocks? https://www.reuters.com/markets/could-trump-tariffs-become-bric-building-blocks-2025-08-07/August 8,2025
[v]Freidin Evan BRICS Pay as a challenge
to SWIFT network https://www.lowyinstitute.org/the-interpreter/brics-pay-challenge-swift-network31-12-2024
[vi] Central Bank Digital Currency Tracker ,July 2025https://www.atlanticcouncil.org/cbdctracker/
[vii] Motwani Suhail et Central Bank Digital Currencies in India: The Future of Money or a Failing Experiment? April 2 2025https://www.fticonsulting.com/insights/articles/central-bank-digital-currencies-india-future-money-failing-experiment
[viii]RBI Guv flags crypto concerns, says it may hamper financial stability
Business Standard,June 6,2025ttps://www.business-standard.com/finance/news/rbi-guv-flags-crypto-concerns-says-it-may-hamper-financial-stability-125060600580_1.html
[ix] Dilawar Ismail https://www.arabnews.com/node/2607495/pakistan ,July 9,2025
[x] Maheesha Mudugamuwa Crypto transactions: Growing trend in need of regulatory framework https://www.themorning.lk/articles/EVefKF1lNkf4Lms7nHVV,May 4,2025
[xi] TAlam ,Cryptocurrencies in Bangladesh: a growing shadow economy
[xii] Lirpa Loof Nepal Quietly Becomes a Bitcoin Mining Havenhttps://thehimalayantimes.com/nepal/nepal-quietly-becomes-a-bitcoin-mining-haven,April 1 2025
[xii]A tiny Himalayan Nation’s Big Crypto Gamblehttps://theworld.org/stories/2025/03/05/a-tiny-himalayan-nations-big-crypto-gambleMarch 5,2025
(The writer is a retired Special Secretary, Government of India. Views expressed are personal. He can be reached at ppmitra56@gmail.com)
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