Finance is increasingly a weapon of war. US politicians and our allies focus too narrowly on macroeconomic tools such as sanctions and promote the dollar as a reserve currency when the modern front is evolving. Today, the real battles are fought on smartphones and in the global currency markets.
China has a multi-decade plan to replace the United States’ biggest asset: the dollar. The dollar is critical to the economic and geopolitical power of the United States as the global reserve currency. Without it, our influence would weaken, and our debt would become a bigger problem. This is precisely what the Chinese Communist Party and the Kremlin want.
China and Russia they lost billions of dollars in US Treasury stocks while increasing their gold stocks. Our sanctions, designed to separate countries from the “western” economic system, are no longer enough of a deterrent for those who can control financial activity within their borders and project their power abroad.
Authoritarian adversaries—including China, Iran, and Russia—are actively building parallel cross-border economic systems that pull into their orbits not only neighboring countries, but also our allies who trade heavily with them.
For example, more than half of businesses in Japan accept Alipay, while more than a third accept WeChat Pay. This distribution gives two Chinese companies unprecedented visibility into the individual transactions of the Japanese consumer and business market. It could allow China to disrupt Japan’s economy if tensions rise, such as in a potential conflict over Taiwan.
China sees financial technology and cryptography as tools to extend its financial power and surveillance around the world. The United States must respond in two ways: export our financial technology and systems worldwide and embrace bitcoin as a strategic reserve asset instead of stifling innovation.
Lawmakers and politicians on both sides of the aisle, especially President-elect Donald Trump, recognize the power of keeping bitcoin on the nation’s balance sheet as a hedge against inflation. This direction will also strengthen the resistance of the United States against the economic challenges presented by China’s financial strategies.
The Federal Reserve, like many central banks, holds a diverse portfolio of reserve assets. By 2024, this includes about $35 billion in foreign currencies and $11 billion in gold stocks. These holdings demonstrate America’s economic strength and provide liquidity during financial stress. However, in our rapidly digitizing world, the absence of a native digital asset in this portfolio is becoming more and more evident.
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2024-12-31 17:18:00
