It’s no secret that foes of the United States – including Venezuela, Iran, Russia, and China – are experimenting with cryptocurrency technology as they seek to render their economies immune to crippling US sanctions.
However, a new study from the Foundation for Defense of Democracies (FDD) exposes the lengths to which these rogue nations are willing to go to make this a reality.
“For decades, U.S. adversaries have been trying to evade and undermine this power, but there has been no way to conduct significant international commerce without moving through the pipes of the U.S.-led global financial system. Now, however, new pipelines are being built,” the Foundation for Defense of Democracies (FDD) stated in the study.
Weaponizing crypto to resist US economic pressure
Iran, Venezuela, Russia, and China – four US foes affected by or constantly at risk of US sanctions – go “beyond mere sanctions evasion” and develop alternative global commerce payments systems outside of US influence via blockchain technology and cryptocurrencies, the study reads.
According to the FDD – while they are exploring the development of their own state-backed crypto – China, Iran, and Venezuela also restricted access to the public cryptocurrencies that are currently available on the market.
“Russia, Iran, and Venezuela have initiated blockchain technology experiments that their leaders paint as tools to offset U.S. financial coercive power and increase sanctions resistance. China is also wary of U.S. financial power and the ever-present threat of sanctions against Chinese officials,” the researchers stated.
Venezuela’s ‘blockchain’ mess serves as a case study
But these endeavors have met with mixed success.
As Nicolas Maduro’s government failed to build the economic and technical infrastructure for Venezuela’s state-backed cryptocurrency, the Petro is useful to neither the South American country’s citizens nor its trading partners, the FDD argues.
Instead, the researchers deemed Petro more of a “propaganda effort than a technical or financial accomplishment.”
However, Venezuela’s case with its government-backed crypto should serve as an example for other US foes who are planning to develop their own digital currency, according to the FDD.
“The petro’s shoddy implementation provided little more than a vehicle for regime propaganda rather than any technical or economic utility. And yet, Iran, Russia, and even China are likely to learn from Venezuela’s missteps,” the study reads.
Russia’s regional crypto, Iran’s Swift alternative, and China’s blockchain research
While Venezuela has failed to get its so-called “cryptocurrency” off the ground, the other three US adversaries are working hard to create their own crypto and blockchain-based economies.
According to the FDD, Russia seeks to lessen the impact of US sanctions by focusing on blockchain technology and including it as a long-term national security and economic goal.
With the goal of facilitating trade and investment outside the grip of the United States, Russian financial institutions are running multiple blockchain pilots. The country’s Ministry of Finance is also planning to develop a regional crypto with other members of the Eurasian Economic Union (EAEU).
As Iran has been hit hard by sanctions – bringing its crude oil export to a historic low – the country’s government is looking to create an alternative to SWIFT, the FDD stated.
According to the study, Iran is investing heavily in blockchain development with plans to create a national cryptocurrency, which would be used for domestic transaction settlement.
Another crypto is in the works in Iran by the startup Kuknos, in which the organization seeks to develop a gold-backed digital currency called Peyman that four Iranian banks would use initially to tokenize assets in the fiat world.
Aiming to neuter the USD as a global reserve currency and “displace” the US in the global financial system, China devotes much of its resources to blockchain research, as well as developing a national, state-backed cryptocurrency.
“Of all U.S. adversaries, China is best positioned to develop blockchain-based digital currency infrastructure that could compete with the dollar-based financial system,” the study says.
In addition to its state-backed crypto development, the People’s Bank of China (PBOC) and Chinese authorities are researching blockchain’s use for credit, finance, and real estate projects, as well as a blockchain-powered securities trading platform.
The US must take the lead in the ‘crypto race’
With Venezuela, Iran, Russia, and China building their “blockchain sanctions resistance,” it is crucial for the US to be in a leading position during the international “crypto race,” the researchers argue.
They say the United States needs to ensure that blockchain projects are developed in a way “that will expand the transparency, freedom, and prosperity of the last century.”
“The way forward is not to just consider the threats emanating from various types of fintech, but to think more creatively how the global financial system should adapt to technological change,” the study reads.