Techno-Nationalism

Chapter 28Fragmented Finance

The same tectonic geopolitical and techno-nationalist forces that are fragmenting global supply chains are also affecting financial markets. Financial markets now face their own version of de-risking and decoupling scenarios, which are being accelerated by three distinct factors.

The first factor is the development of central bank digital currencies (CBDCs) and their attendant geopolitical side effects. The second involves increasingly demanding accounting standards and outbound investment restrictions, and the third factor involves export controls and sanctions, which put a large swath of the banking and fintech sectors under scrutiny—including sovereign wealth funds.

CENTRAL BANK-BACKED DIGITAL CURRENCIES

As part of its 14^th five-year plan, China was said to be investing heavily in R&D and new infrastructure for a digital currency. The e-CYN or ‘e-yuan’, figures to play a critical role in the Chinese Communist Party’s domestic affairs and, further afield, in the pursuit of its geopolitical interests.¹

Unlike a decentralised cryptocurrency issued by a private non-state actor, CBDCs are digital manifestations of a national currency and represent a store of value backed by a central bank.

There are opposing views on digital currencies. Privacy advocates argue that digital currencies give authoritarian governments the means to monitor its populace and use the digital currency as a behaviour modification tool.

As for its more benign features, digitised ...