Currency Dominance and National Power in the Era of Distributed Ledger Technology and Cryptocurrency

Abstract

Currency dominance has been the symbol of national power, influence, and dominance. After the Second World War, the Dollar has maintained its unrivaled influence as a currency reserve by central banks and as a global transaction currency. Recently, cryptocurrency and the distributed ledger system were seen as a challenge. However, due to the challenge it poses to the sovereignty of nation-states, central banks have resorted to developing the central bank digital currencies (CBDCs). China is the only major economy to have tested a CBDC, a symbol of its increasing economic power and innovation. Contrary to Mearsheimer’s theory of offensive realism, developments show that China can use its offensive economic capabilities to build a regional order through the belt and road initiative (BRI). With the recent release of its Central Bank Electronic Payment and the Blockchain-based Network System, China can seek to regionalize the use of its renminbi (RMB) and rival the power of the Dollar.