The world of finance is witnessing a seismic shift as both capitalist and socialist powers embrace cryptocurrencies, particularly Bitcoin. This unprecedented convergence of ideologies around blockchain technology marks a new chapter in international economic relations. With Russia’s State Duma approving a law that allows for cross-border transactions via cryptocurrencies, China’s ongoing exploration of blockchain amid continued regulatory ambiguity and the US’s plan to pay part of the domestic debt with digital currency, Bitcoin has become a geopolitical force that transcends traditional divides.
Russia’s Crypto Pivot
On July 30, 2024, Russia’s lower house of parliament, the State Duma, approved legislation allowing businesses to use cryptocurrencies for international payments. This move may come as a response to the extensive sanctions imposed by the U.S. and its allies on Russian entities due to the ongoing war with Ukraine. Russia’s central bank has indicated plans to begin using crypto for cross-border payments by the end of 2024, a historic decision aimed at bypassing traditional financial systems dominated by Western powers.
Anatoly Aksakov, head of the Duma, hailed this decision as revolutionary in the financial sphere, marking Russia’s full commitment to embracing the decentralized, censorship-resistant nature of cryptocurrencies. Bitcoin, in particular, offers Russia an opportunity to conduct transactions that cannot be blocked by governments or banks, as noted by Mati Greenspan, CEO of Quantum Economics.
This crypto shift represents more than just a workaround for sanctions; it signals Russia’s growing recognition of the geopolitical potential of digital currencies. In a world where traditional financial systems are increasingly wielded as tools of political power, Bitcoin offers Moscow an alternative financial system to operate independently of Western control.
“Cripto Street NFT”
China’s Blockchain Balancing Act
Meanwhile, China, despite its infamous regulatory crackdowns on cryptocurrency, continues to be a significant player in the blockchain ecosystem. Rumors have been circulating about a potential “unban” on Bitcoin in China, spurred by the legalization of Bitcoin ETFs in Hong Kong. While Mainland Chinese investors are currently restricted from participating in these ETFs, Hong Kong has become a financial hub for blockchain experimentation. Several prominent Chinese asset managers, through their Hong Kong subsidiaries, have taken positions in Bitcoin, further fueling speculation about Beijing’s long-term stance on digital assets.
However, the possibility of China fully lifting its ban on Bitcoin remains unlikely. The country’s financial authorities, such as the People’s Bank of China, have shown little inclination to reverse their restrictive policies. Yet, Chinese courts have recognized Bitcoin as property, adding to the complexity of the regulatory environment. These contradictory signals suggest that China remains torn between the decentralized promise of blockchain and the control offered by its own central bank digital currency, the digital yuan.
China’s strategic focus on the digital yuan as part of its Digital Currency Electronic Payment (DCEP) system has raised concerns globally. The rapid development of this currency could weaken the dominance of the U.S. dollar in international trade, giving China a significant geopolitical edge in global finance. As a result, the U.S. faces increasing pressure to respond, whether through promoting its own digital currency or strengthening the regulatory framework around Bitcoin and other stablecoins.
The U.S. Response: Stablecoins and Bitcoin Reserves
Across the Atlantic, the U.S. is grappling with how to adapt to this rapidly evolving financial landscape. Senator Cynthia Lummis of Wyoming recently proposed a bold vision of an arms race, not for weapons, but for Bitcoin. Lummis suggested that the U.S. should purchase a significant amount of Bitcoin, predicting that it could one day help halve the U.S. national debt. This view has gained traction among Republicans, with former President Donald Trump championing the idea of making the U.S. the crypto capital of the world.
At the same time, other voices in American politics, such as Paul Ryan, are advocating for the promotion of dollar-backed stablecoins. These stablecoins, which maintain a fixed value by being pegged to traditional currencies like the U.S. dollar, are seen as a way to counter China’s growing influence with the digital yuan. Ryan argued in the Wall Street Journal that stablecoins could help maintain the U.S. dollar’s hegemony in international markets, but only if the U.S. implements a clear and supportive regulatory framework.
A New Financial Arms Race
The global embrace of Bitcoin by such diverse political actors is creating a new financial battleground. Governments like the U.S. and El Salvador already hold significant Bitcoin reserves, with the U.S. government reportedly possessing over 210,000 bitcoins, worth more than $13 billion. The growing number of Bitcoin “whales” and institutional investors, including major corporations like MicroStrategy and Tesla, only adds to the market’s volatility and importance.
China’s strategic advancements with its digital yuan, Russia’s pivot toward crypto to sidestep sanctions, and the U.S.’ internal debate over the role of Bitcoin and stablecoins are setting the stage for a new financial arms race. The stakes are not merely about technology but the future of global economic dominance.
What started as a fringe technological experiment has now evolved into a full-fledged geopolitical issue. Capitalists and comrades alike are going all in on blockchain, with Bitcoin at the center of a new international order. As the lines blur between traditional financial systems and decentralized digital currencies, the world is witnessing a profound shift in how nations wield economic power.
The competition for control over Bitcoin and blockchain technology is no longer just about wealth — it’s about global influence and the balance of power in a rapidly changing world. Whether through strategic reserves, regulatory frameworks, or international payments, Bitcoin is reshaping the rules of the game.
