Is Digital Currency being Weaponized for Economic Warfare?

Is Digital Currency being Weaponized for Economic Warfare?

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The cryptocurrency revolution spawned, in part, as a way to take away power from financial intermediaries such as banks and governments and return it to the people. The initial response from many federal governments ranged from wariness to resistance. Now, however, certain countries are suddenly embracing digital currency, but for different reasons other than blockchain visionaries originally intended: global economic positioning.

With the US dollar being the most internationally used fiat currency, it is no surprise that the United States government isn’t rushing to embrace cryptocurrencies that can disrupt its hegemony. Nonetheless, several countries that are not exactly on friendly terms with the USnamely China, Iran, and Venezuelaare looking to do just that.

China on the Verge of a National Cryptocurrency

China has recently renewed claims that it is close to instating a national and state-controlled cryptocurrency. Experts have suggested that such an unveiling is likely, as it is in China’s interest to do so.

The citizens of China have proven to have an appetite for cryptocurrency, engaging in it widely until it was banned in 2017. Nonetheless, a national cryptocurrency has lately started to circulate on an experimental basis in the Chinese cities of Shēnzhèn and Guìyáng. 

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Some in the financial sector have suggested that a national cryptocurrency has more to do with exerting greater state control and monitoring over financial transactions in the country, as well as looking for ways to circumvent the use of the dollar in international transactions. As the US-China trade war drags on, China may be further motivated to launch its own digital currency.

Iran Looks to Skirt US Sanctions

Much like China, Iran banned its citizens from using foreign cryptocurrency in 2018 but is now releasing its own domestic digital currency as it struggles under the harshest US sanctions to date. It’s new cryptocoin, called crypto-rial, is meant, in part, to help facilitate international transactions by evading sanctions with untraceable bank transfers. The crypto-rial is backed by gold and currently being tested in the Iranian banking infrastructure. The government will provide users with its own virtual exchange platforms. 

Iran enjoys the benefit of cheap electricity, which will help facilitate the mining of the crypto-rial. Currently, the government plans to delegate mining responsibilities to private tech firms in the country. 

Venezuela Seeks to Stabilize Economy

The Venezuelan government is looking to find a way to deal with crippling hyperinflation and promote assurance in an economy that is crumbling under US sanctions. In light of this, the government released the petro in 2018 as its fiat money became virtually worthless, looking for a way to access international finances. 

While it appeared to have a rough start, it has recently picked up momentum, trading at exponential levels of volume. The US government signed an executive order prohibiting American businesses and citizens from using the petro, which is perhaps a sign of its legitimacy.

It remains to be seen to what extent national cryptocurrencies may be effective in destabilizing the US dollar or bypassing it in international trade. Governments like China and Iran will still have work to do in selling it to their people once their digital currencies get launched. Still, it can be disheartening for cryptocoin enthusiasts to see it used for means not necessarily in step with the values that the blockchain was founded on. 

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