From Analog to Digital: The Geopolitical and Socioeconomic Calculus of Central Bank Digital Currencies

<p>The rise of Bitcoin and other digital currencies have quickly evolved from meme coin novelty to sophisticated algorithms intended to enhance traditional financial infrastructures, offering real world utility. Simultaneously, orchestrated efforts by central banks and international institutions are well under way in launching central bank digital currencies (CBDCs), which promise to revolutionize the international monetary system. As governments and central banks pursue the digitization of their analog fiat, motivations to deploy retail and wholesale CBDCs are varied and are the result of both technological and institutional factors (Auer, Cornelli, and Frost 2020). But does the story end here? Power Transition predicts that a rising challenger dissatisfied with the status quo will seek to adjust the international order (Tammen 2000). Dedollarization of international trade, development of alternate payment infrastructures not subject to western sanctions, expansion of preferential economic blocs and anti-western trans-national institutions are all manifestations of dissatisfaction with an incumbent order. Wholesale CBDCs, for example, offer a technological advantage over traditional banking through reserve currencies by disintermediating cross border payments thus reducing economic frictions in terms of payment and settlement time and cost while also providing peer-to-peer connectivity. Furthermore, a first mover advantage in the adoption of CBDCs may result in economic benefits for those quicker on the draw. Thus, might there be geopolitical, ideological, or socioeconomic motivations driving the development and utilization of CBDC’s? By leveraging a novel CBDC Project Index, this research investigates the determinants influencing the adoption of Central Bank Digital Currencies (CBDCs) across various countries, utilizing a robust econometric panel data regression approach. It specifically examines how pervasive digital infrastructure, economic development, bilateral trade levels, and geopolitical factors such as sanctions impact the likelihood of CBDC adoption. The findings suggest that central banks are more inclined to adopt CBDCs in environments characterized by advanced technological infrastructure and significant international trade. Moreover, the results indicate that sanctions are a relevant factor, driving nations towards CBDC adoption as a strategy to bypass traditional hegemonic financial controls, thereby facilitating more decentralized and autonomous international monetary transactions. CBDC adoption decentralizes international monetary transactions and undermines financial structures that Power Transition requires to generate hegemonic stable control. In summary, the decentralization of the global monetary system, initiated by the digitization of money through CBDCs, has the potential to significantly enhance international interactions. However, it also diminishes the effectiveness of current geopolitical tools and strategies that are employed to maintain international stability.</p>

Name thesis:degree_name

Political Science, PhD

Level thesis:degree_level

Open Access Dissertation

Discipline thesis:degree_discipline

School of Social Science, Politics, and Evaluation

Year dc:date.available

2024

Author dc:creator

• Bogaardt, Paul Christopher

Contributors dc:contributor

• Jacek Kugler
• Yi Feng

• CBDC
• Central Bank Digital Currency
• hegemony
• monetary system
• Power Transition Theory
• Sanctions
• Political Science

Repository record dc:identifier

https://scholarship.claremont.edu/cgu_etd/912

OAI identifier oai:identifier

oai:scholarship.claremont.edu:cgu_etd-1928