As international powers seek independence from US economic dominance, nations like India, China, and Russia are exploring new avenues, including cryptocurrency, to bypass the US-controlled financial systems. The move towards a non-dollar-based global economy is gaining traction, driven by geopolitical tensions and concerns about US fiscal stability.
Russia’s Crypto Experiment in International Trade
Since September 1, Russia has legalized the use of cryptocurrencies for international trade, setting up an “experimental infrastructure” to facilitate these transactions. However, despite its experimentation, Russia remains reluctant to legalize crypto for domestic use. Meanwhile, India faces the fallout from its Russian investments, with over $900 million in unpaid dividends trapped due to sanctions on Russia. This ongoing situation highlights the need for alternative transaction systems, free from the influence of the US dollar.
India has also recently allowed the Chinese crypto exchange, Binance, to reopen after the company paid a hefty fine of ₹18.82 crore for violating Indian laws. While seemingly unrelated, these developments underscore a shared goal among non-US-aligned nations: the pursuit of a financial system that is not controlled by any single nation. The push for a crypto-based international transaction framework is rapidly evolving as countries navigate the complexities of bypassing the dollar.
The Three Driving Forces Behind the Push for Change
The global search for alternatives to the US dollar is driven by three main factors:
- US Control Over International Payment Systems
Countries like India, China, and Russia are increasingly wary of the US’s ability to freeze assets and halt transactions through its control of the SWIFT international payment system. India’s struggle to retrieve its dividends from Russia is a prime example, while China faces similar concerns regarding potential sanctions if it takes military action on Taiwan. - US Hegemony through Private Corporations
The United States has used both state power and private companies to further its geopolitical interests. Following Russia’s invasion of Ukraine, not only did the US government impose sanctions, but over 1,000 private companies also cut ties with Russia. Even social media giants like Meta have banned Russian state media from platforms such as Facebook and Instagram, further isolating the country. - Growing Concerns Over US Debt and Economic Stability
The United States’ rising debt, which now stands at over $35 trillion, has raised alarm worldwide. With the US debt-to-GDP ratio at 123%, there are fears of inflation and potential default. Moreover, concerns about the US’s economic policies, particularly its tilt towards “Marxist socialism” and “wokeness,” are making many countries hesitant to rely solely on the dollar. These concerns are pushing nations to explore alternatives, such as a multi-state-led cryptocurrency.
The Hurdles in Adopting Cryptocurrency
Despite the potential for cryptocurrency to replace the dollar in international trade, there are numerous challenges. Many countries, including Russia, are unwilling to fully legalize crypto for domestic use. India, while not banning it outright, remains cautious, and China, after banning the use and mining of cryptocurrencies in 2021, still allows its citizens to hold crypto.
The legal ambiguity surrounding cryptocurrencies has led to significant issues. In India, users of the WazirX crypto exchange experienced a massive hack, losing $230 million. The platform forced its 4.2 million users to absorb the loss in a controversial move described as “socializing the losses.” Incidents like this highlight the risks involved in an unregulated crypto market and the lack of institutional protections that exist in traditional financial systems.
The Road Ahead
The path towards a global cryptocurrency-based transaction system is riddled with complexities. It requires not just the adoption of a common currency but also the establishment of the necessary infrastructure, including exchanges and regulatory frameworks. As Monika Halan, the author of the “Let’s Talk” series on finance, points out, “He who owns the exchange has the control.” The need for collaboration between the major powers outside the US is evident, but ongoing geopolitical tensions may hamper progress.
As the world explores alternatives to the dollar, the crypto story continues to unfold. However, Halan remains cautious, advising retail investors to stay away from crypto until there is more regulation. “Wait till there is regulation, else the risk is all yours on exchanges that run away with your money, ‘socialize’ losses or coins that are fully fake.”
In this evolving landscape, the search for a common currency outside US control is not just about financial systems—it’s about global power dynamics and the future of international trade.
