Economic Power in the Age of Geopolitical Competition: CBDCs, Sanctions and Global Power

Abstract

As we look to the future of intensifying geopolitical competition, economic power has become an increasingly important tool which states are starting to use in order to pursue strategic objectives. Along with the widespread use of economic sanctions, the emergence of Central Bank Digital Currencies (CBDCs) has the potential to transform the global financial system and alter existing power dynamics. This study adopts a qualitative research approach which draws on a comprehensive review of academic literature, reports from international organizations, government publications and policy analyses. It looks into the relationship between CBDCs, sanctions and the international financial system through the lens of economics and international relations while linking these to recent geopolitical developments. The findings of the study suggest that even though sanctions remain one of the ,past influential tools of economic statecraft, the development of CBDCs may gradually reduce their effectiveness by providing alternative payment mechanisms that bypass traditional financial networks. However, the true extent of this change depends on the global adoption of CBDCs, interoperability between digital currencies and the geopolitical influence of the issuing states. Overall, the study concludes that CBDCs do have the potential to reshape the global financial order but their impact will be gradual and contingent upon international cooperation, regulatory frameworks and evolving geopolitical relationships. These findings contribute to a deeper understanding of the intersection between finance, technology and global power in the twenty-first century.