Summary:
China is executing a long-term strategy to undermine the dollar as the global reserve currency.
The U.S. must embrace bitcoin as a strategic reserve to counteract financial threats.
Bitcoin is often referred to as digital gold, providing a hedge against inflation.
Countries like El Salvador are already seeing the benefits of integrating bitcoin into their economies.
The U.S. needs to weaponize financial technology to maintain its economic influence.
The Financial Battlefield
Finance is increasingly becoming a weapon of war. U.S. policymakers and allies often focus narrowly on macroeconomic tools like sanctions and promoting the dollar as a reserve currency. However, the modern financial battles are being fought on smartphones and in the global currency markets.
China has embarked on a multi-decade plan to displace the U.S.'s greatest asset: the dollar. This currency is crucial for the United States' economic and geopolitical power as the global reserve currency. A decline in dollar influence would weaken U.S. power and exacerbate debt issues, which is exactly what adversaries like the Chinese Communist Party and the Kremlin desire.
China and Russia have significantly reduced their holdings of U.S. Treasury securities while boosting their gold reserves. Such actions reflect a shift in strategy, as sanctions alone are no longer effective against nations capable of controlling financial activities within their borders.
Responding to the Challenge
China views financial technology and cryptocurrency as instruments for enhancing its global financial power. The U.S. must respond by exporting its financial systems and embracing bitcoin as a strategic reserve asset. This shift is recognized by lawmakers across the political spectrum, including President-elect Donald Trump, who sees bitcoin as a hedge against inflation.
As of 2024, the Federal Reserve holds a diversified portfolio, including foreign currencies and gold. However, the absence of a native digital asset, such as bitcoin, is increasingly apparent. Bitcoin, often dubbed digital gold, is scarce and has the potential to bolster the U.S. economic future. The U.S. already holds 210,000 bitcoins seized from illegal activities, providing a significant first-mover advantage.
Critics argue that bitcoin's volatility makes it an unsuitable reserve asset. However, as adoption increases and the market matures, this volatility is expected to decrease. Countries like El Salvador have already embraced bitcoin as legal tender and treasury reserve, experiencing significant value increases.
A Multi-Front War
The U.S. is engaged in a multi-front war with China, including the financial services sector where crypto serves as a critical tool. If the U.S. loses this battle, global financial services will be dominated by states that prioritize control, surveillance, and dominance over freedom.
Trump's assertion that “If we don’t do it, China is going to pick [bitcoin] up” underscores the urgency of this issue. The U.S. must empower its private sector to engage economically with contested regions, expanding the use of American payment systems and dollars.
Currently, adversaries are outpacing the U.S. in exporting their financial systems. To counter this, the U.S. should weaponize financial technology and crypto, enabling citizens in hostile states to access USD-based stablecoins and payment services, thereby separating their economies from oppressive government controls.
As the world stands at a financial crossroads, the U.S. must adapt to the reality of digital currencies by embracing bitcoin as a reserve asset. The time for decisive action is now, with profound implications for global financial stability and innovation.
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