Extinguishing the Jurisdictional Nexus in Extraterritorial Sanctions

Abstract

The enforcement of extraterritorial financial sanctions has historically relied on the structural centralization of correspondent banking networks, primarily utilizing U.S. dollar clearing mechanisms as a territorial nexus for prescriptive jurisdiction. This paper examines how the advent of wholesale Central Bank Digital Currencies (wCBDCs) and distributed ledger technology (DLT) structurally dismantles this transit-layer vulnerability. By facilitating atomic, peer-to-peer settlement in tokenized sovereign assets, DLT-based platforms eliminate the intermediary clearing layer, thereby extinguishing the objective territoriality required for traditional primary sanctions enforcement under statutes such as the International Emergency Economic Powers Act (IEEPA). Recognizing this technological bypass, the paper argues that sanctioning authorities are executing a strategic regulatory pivot from automated transit chokepoints toward localized endpoint coercion. This shift relies on secondary sanctions deployed against domestic interfaces, leveraging an institution's macroeconomic reliance on the broader U.S. dollar ecosystem. Furthermore, the paper contextualizes this transition within the collapse of multilateral dispute resolution at the World Trade Organization, positing that institutional paralysis has accelerated a technological flight to sovereign ledgers. Ultimately, the transition to decentralized digital currency blocs redefines international economic law, transforming extraterritorial coercion into a localized conflict of defensive statutes and symmetric economic statecraft.