Ukraine, Sanctions and Central Bank Digital Currencies: The Weaponization of Digital Finance and the End of Global Monetary Hegemony? - AsiaGlobal Papers No. 7

This paper analyzes the geopolitical and strategic dimensions of how technology is reshaping the international monetary and payments systems. Freezing some US$300 billion of Russia’s central bank reserves in response to the invasion of Ukraine in 2022 highlighted the power of the existing Western-led digital monetary and payments architecture and the potential risks of dependence on that system. We analyze the new technologies which could underpin a new international monetary system, not dominated by a monetary hegemon. The geopolitics of a multipolar world coupled to the evolution of enabling technologies may well result in a small number of major economy central bank digital currencies and currency areas, eliminating the historical pattern of monetary hegemony. There is a clear need to redesign systems to reduce this likelihood and support international monetary and payment arrangements as a public good and we explore how this might be achieved.