China Turns Crypto into a Tool of Geopolitical Power and Digital Warfare

China is transforming cryptocurrency and central bank digital currencies (CBDCs) into powerful instruments of statecraft, according to a 2025 Study Times report from the Central Party School. The study describes digital money as a weapon of “financial mobilization,” enabling the state to redirect liquidity during crises such as banking failures or sanctions. Blockchain networks are portrayed as a “digital logistics front,” merging financial stability with national defense.

The report asserts that modern warfare now extends into financial systems, where crypto becomes infrastructure for “total war”—a fusion of deterrence, capital control, and economic resilience. The digital yuan and blockchain-based settlements are viewed as strategic tools built to operate independently of U.S. financial systems like SWIFT. By digitizing money flows, Beijing aims to sustain liquidity, support defense industries, and preserve social stability under external pressure.

Economist Barry Eichengreen notes that the U.S. dollar’s share of global reserves has dropped from 71% in 2000 to 58% in 2024, as nations seek autonomy from American dominance. China’s mBridge project—linking its CBDC with those of Saudi Arabia, Thailand, and the UAE—underscores this shift, offering a parallel payment network that bypasses Western oversight.

Yet digital assets also serve opposing forces. TRM Labs’ Crypto Crime Report 2025 revealed that sanctioned exchanges like Russia’s Garantex and Iran’s Nobitex handled most illicit crypto inflows, while groups such as Hamas and Hezbollah raised funds through stablecoins like USDT on TRON.

Military analysts echo that blockchain enhances national security through encrypted communications and tamper-proof logistics. As theorist Jason P. Lowery describes, Bitcoin functions as “a non-lethal form of power projection.” For Beijing, crypto and blockchain are no longer just financial tools—they’re strategic assets defining the next era of global competition, where digital ledgers shape both markets and warfare.