The world is experiencing major and rapid changes in geopolitical terms. Using a currency other than the dollar in trade is not a new issue. Some countries are turning to currencies that they can use among themselves, even if they do not establish commercial relations with the USA. There are discussions that this search may be related to the geopolitical future of Bitcoin and especially stablecoins.
Today’s global financial structure II. It was created during the Bretton Woods Conference, which has been in force since the end of World War II, that is, signed in 1944. At the conference, a decision was also taken to make it the world’s reserve currency by pegging it to the US dollar and other countries’ currencies to the US dollar.
The said position of the dollar began to be shaken with the onset of the great financial crisis in 2008. This led to a practice where central banks bought government bonds to stimulate the economy. A year after the crisis, Bitcoin, a decentralized digital currency, was launched…
BRICS countries, namely Brazil, Russia, India, China and South Africa, are concentrating on working to establish their own unit. BRICS is not the only example of this… These developments challenge the long-standing hegemony of the US dollar. The USA, on the other hand, may need to find a solution to the global decline of the dollar in the coming period.
States like Texas, Florida, and North Carolina oppose the US Federal Reserve digital currency (CBDC), which is still under investigation. In such a case, the USA may give up on this and turn its focus to alternatives such as stablecoins.
Why is the geopolitical importance of stablecoins coming to the fore?
Since stablecoins are unlimited and open and do not require permission, anyone can buy these cryptocurrencies. In this respect, they are similar to Bitcoin. One of the most important differences between Bitcoin and stablecoins is that Bitcoin is decentralized. We can briefly define stablecoins as a class of cryptocurrencies that attempt to offer price stability by being backed by specific assets such as the dollar, gold or silver.
More specifically, the assets of the company issuing the stablecoin can be frozen if ordered by the US government. Circle, for example, froze more than 75,000 USDC linked to 44 Tornado Cash addresses last year for being on the US Office of Foreign Assets Control’s Specially Designated Countries and Blocked Persons List.
It is stated that one of the reasons behind the EU’s implementation of MiCA regulations may be related to the issue. Due to the risk of “losing” its financial sovereignty to the USA, the EU implemented financial and geopolitical measures to strengthen its position. These measures consist of actions such as enforcing capital controls, limiting the impact of foreign fiat and commodity-backed stablecoins, as outlined in MiCA regulations.
In addition, the EU is also working on developing a digital euro in order to maintain control over its financial system. Because the euro is an important alternative to the US dollar. By encouraging the use of the euro in international trade and finance, Europe could reduce the potential for dollar stablecoins to gain market share in the EU.
Where does Bitcoin stand here?
If countries enter into a currency war with each other, Bitcoin will attract attention with its decentralized, borderless, censorship-resistant and peer-to-peer structure. Bitcoin operates on a network that enables global economic participation, unlike stablecoins that are under the control of central authorities.Thanks to this structure, it has financial inclusion and freedom.
The future of stablecoins and Bitcoin in the geopolitical arena
As cryptocurrencies become more widespread, so does the trend towards stable, centralized currencies pegged to fiat currencies or commodities, especially in the short term. However, there are concerns that this trend may also bring with it some potential challenges.
Governments can also encourage the adoption of national cryptocurrencies beyond their borders in order to gain and maintain an advantageous position in the global economy. That’s fine so far, but for governments to resort to manipulation or power games for this purpose, it poses a risk to smaller and less economically stable countries.
Sources: Cointelegraph, Investopedia