USD hegemony, bitcoin, Central Bank Digital Currency and the geopolitics of money

Abstract

Since World War II, the US dollar (USD) has substantiallyincreased its prominence in international financial systems, cul-minating in its position as the predominant currency, facilitatingapproximately 90% of global foreign exchange transactions. Thereliance of most nations on the USD for international trade -particularly for oil, commodities, and other goods - hascemented its critical role in global finance and geopolitics.Hence, the usage of the USD supported and forged an eco-nomic and geopolitical function for the emitting country, theUnited States of America. The geopolitical implications and risksrelated to the USD hegemonic power in trade and financialtransactions have become increasingly more striking, especiallyin recent decades and years. The sanctions imposed onVenezuela, Iran and more recently on Russia via the US dollar-dominated SWIFT payment system highlighted the potentialthreat posed by the USD hegemonic power in the global mon-etary system. However, in the new millennium, alternative digitalcurrencies have begun to exert influence and have implicitlyand explicitly posed a threat to that hegemony. Bitcoin andother cryptocurrencies, for instance, have enabled internationaltransactions without reliance on USD use. Additionally, theemergence of several multi-currency Central Bank DigitalCurrencies (CBDCs) would allow nations to conduct cross-borderpayments using various currencies without passing through theUSD as an intermediary. Our paper explores the geopoliticalimplications of USD use on the international stage and examinesthe potential opportunities and threats posed by these newdigital currencies for countries.