China’s Crypto Strategy: Turning Digital Money into a Geopolitical Weapon

Digital Money as a Tool of Geopolitical Power

The study argues that the modern battlefield extends into finance. Cryptocurrencies and CBDCs form an infrastructure for “total war,” combining deterrence, capital allocation, and domestic stability. By digitizing money flows, China can maintain liquidity, fund defense industries, and support domestic consumption even when global finance is disrupted.

The report outlines a triad of total war, hybrid war, and digital financial war, noting that digital ledgers and blockchain settlements—including the digital yuan—are strategic assets designed to operate independently of U.S. sanctions and the SWIFT system.

“Digital currencies have become strategic assets in hybrid warfare, reshaping cross-border capital flows during wartime.”

The Rise of Alternative Financial Networks

China’s mBridge project, linking CBDCs from China, Saudi Arabia, Thailand, and the UAE, exemplifies efforts to bypass traditional financial infrastructure and reduce dependence on the U.S. dollar. Economist Barry Eichengreen notes that the dollar’s share of global reserves dropped from 71% in 2000 to 58% in 2024, as governments seek alternatives for geopolitical reasons.

By leveraging blockchain technology, Beijing aims not just for faster transactions but for economic autonomy under global financial pressure.

Crypto’s Role in Sanctions and Illicit Finance

Digital assets also operate on both sides of the geopolitical battlefield. According to the TRM Labs 2025 Crypto Crime Report, sanctioned exchanges such as Russia’s Garantex and Iran’s Nobitex handled over 85% of illicit inflows to restricted markets. Terrorist organizations, including Hamas, Hezbollah, and ISIS affiliates, have used stablecoins like USDT on TRON to raise funds, prompting governments like Israel to freeze millions in related accounts.

This dual-use nature of crypto highlights how digital finance has become a tool of both control and enforcement.

Blockchain as a Base for Defense and Soft Power

Military theorist Jason P. Lowery argues in Softwar that Bitcoin functions as “a non-lethal form of power projection—a digital defense system secured by electricity, not explosives.” China has adopted a similar perspective, embedding blockchain in national resilience and deterrence strategies.

A 2025 study in Technologies found that blockchain can strengthen military operations through secure communications, immutable logistics, and quantum-safe authentication, hardening command systems and supply chains against both cyber and physical attacks.

The Geopolitical Divide in Crypto

The growing militarization of crypto underscores a widening geopolitical divide. Western governments aim to limit the use of digital assets in military contexts, whereas China integrates them into state policy. Eichengreen notes that crypto’s influence on the dollar’s dominance will depend on who controls the underlying infrastructure.

China’s hybrid model—combining economic control, technological sovereignty, and blockchain innovation—signals that the next phase of great-power competition will play out not only in traditional markets but across distributed ledgers and digital finance networks.