How Cryptocurrencies Are Becoming a Geopolitical Tool

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Judging by recent events, cryptocurrencies could soon become incredible geopolitical tools. While war is diplomacy with other means, cryptocurrencies could very well become war, or human interaction, through alternative economies.

Take, for instance, Ukraine’s war with Russia. The country has funded its military efforts with crypto donations while its citizens have turned to cryptocurrencies for basic living expenses. Fear of Russia avoiding U.S. sanctions with crypto has led to some strange conversations, especially when considering that Russia is the third-largest bitcoin mining nation. Reality makes you wonder whether crypto is more beneficial to Russia or Ukraine. The answer: Both.

There’s more to consider, however, than nation vs. nation politics. Contrary to former U.S. Speaker of the House Tip O’Neill’s assertion that all politics is local, some politics actually are. 

The Use of Cryptocurrencies into a Political Tool

Late last year, both New York mayor-elect Eric Adams and Miami Mayor Francis Suarez said they would accept payment in bitcoin. Not only that, but both cities also have branded cryptocurrencies—Miami Coin and NYCCoin. However, neither coin is doing so well today.

What’s the Big Deal About City Coins?

According to Suarez, if Miami Coin were to take off, it could be a good enough revenue source for the city that citizens might not have to pay taxes. Adams just wants to turn New York City into a hub of crypto innovation.

In Dubai, the city already has a tax-free zone—no personal or corporate income tax. Inside that zone, they’re building Crypto Valley, an incubator for startups to spur innovation.

Historically, U.S. states have used tax incentives to lure businesses to set up shop. Depending on the state’s values, they may seek to attract technology businesses, manufacturers, industrial firms, or service businesses, but incentives are states’ competitive advantages. By offering tax breaks and other incentives, they can attract large businesses to set up shop, which leads to higher employment and a more robust economy. With cryptocurrencies, states are not only competing with other states but with other nations and cities around the world.

Texas Governor Greg Abbott is on the record for being pro-crypto, as well, which is one of the key reasons his state is becoming a crypto mining hub.

Last year, Wyoming became the first state to accept decentralized autonomous organizations as bona fide legal entities. Colorado allows its citizens to pay taxes with crypto.

The race is on. Cities, states, and nations around the world are competing to attract pro-crypto citizens and businesses. 

But why?

Cryptocurrencies As Tools for Geopolitical Dominance?

Money has long been used as a geopolitical tool. The U.S. wasn’t the first nation to use its currency as a force for dominance, but it has perfected the practice. Throughout history, money has been used as a political and economic force for nations to dominate and control others through trade, manipulation, and even militarily. U.S. global economic dominance began when the U.S. dollar became the world’s reserve currency. Some nations would like to change that.

Behind the desire to unseat the U.S. dollar from its position of dominance is the geopolitical desire for hegemony. China wants more influence in Asia and globally. Russia wants more influence in Europe. That’s largely what its invasion of Ukraine is all about.

The European Union wants to be the next superpower.

In a sense, certain U.S. politicians’ critical nature toward cryptocurrencies is the realization that, if they reach mass adoption, that will be the end of U.S. hegemony. If no one controls the currency of the world, then no nation can be the dominant power nor can it control other nations. This reality poses both a challenge and an opportunity.

The challenge is that rogue nations can benefit from cryptocurrencies and use them for nefarious means. The opportunity is that third-world countries with little to no economic clout, and their citizens, can better themselves even if it means bypassing the political and economic authorities, which are often brutal, in their own countries. It could even expand trade on a global scale.

Like a hammer that can be used to either build a house or bludgeon a man to death, cryptocurrencies are nothing more than a tool. Not good. Not evil either. But they can be either a tool for good or evil depending on whose hands grip them. Since the box has already been opened, world leaders should do their best to use crypto for good.

 

 

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