What do North Korean hackers, Tehran currency traders, Russian gold reserves, the digital euro, and a White House directive on federal agency control have in common?  

One answer is the power of money: who controls it, where its value comes from and who decides how it moves across borders. 

North Koreans hackers are in the news for allegedly pulling off the biggest heist of all time, stealing about $1.5 billion in assets from a cryptocurrency exchange. Part of the geopolitical significance of the manoeuvre stems from the country’s use of crypto to get around US sanctions. 

Iran has also used crypto to beat sanctions, but these technologies can be a double-edged sword for countries on the periphery of the global economy. Residents can, analogously, deploy crypto to get around exchange controls. In an effort to stem the depreciation of Iran’s currency, the Iranian central bank has cracked down on rial payments in cryptocurrencies.  

Of course, crypto reduces a lot of the friction of exchanging money in a heavily controlled environment, but there are alternatives, as evidence by the fact that “police periodically announce the arrest of illegal currency traders in the streets of Tehran and other major cities.” Sometimes there’s no substitute for a stack of greenbacks.  

The hardest currency? 

Nation states also have old-school options for dealing with exclusion from global trade. As we’ve discussed, there’s evidence that central banks increase their gold holdings when faced with the threat of sanctions. When you’re barred from making payments in your own currency and have limited access to USD (the world’s reserve currency), it may be rational to build up your gold reserves. 

But digital money can no longer be ignored by policymakers. After all, in a world where payments are increasingly electronic, and stablecoins promise a reliable means to make local and cross-border transactions, nations risk losing control of monetary supply and monetary sovereignty. No wonder central bankers in the EU and elsewhere are investigating digital currencies regulated and controlled by local policymakers.  The digital euro would allow the European Central Bank to maintain control over monetary policy, even as decentralised cryptocurrencies threaten to undermine the Eurozone’s traditional monetary systems. 

Federal reservations 

Even within the nation state or currency union, the question of who controls the money is subject to ongoing political contestation. Central bank independence has, over time, become economic and political orthodoxy in the United States and around the world.  

But that mandate is not a fixed law of nature. President Trump has previously signalled an interest in executive control of the Federal Reserve – and has arguably now taken a step in that direction.  

In the Eurozone, the question of state sovereignty is in some ways even more fraught. Consider how – for better or worse – the euro limits an individual eurozone nation’s ability, for instance, to devalue their currency, as was notably the case during the Greek sovereign debt crisis of 2009-2010. 

In short, money doesn’t just exist, it emerges through political action, and its status is defended and challenged directly and indirectly. As political theorist Stefan Eich puts it: “Modern money is indeed a legal creature that cannot be understood without reference to political power and authority. But money also hangs by a thread of trust and collective belief that can be revoked at a stroke. By helping to constitute and perpetuate social values and relationships, money is not just derivative of political power, it is also inherently a source of power.” (The Currency of Politics 2022) 

Regulation: less is more? 

 Which brings us full circle back to crypto. Crypto is the contemporary example par excellence of how power influences the meaning and value of money, and how money creates power. Crypto cash helped fund Trump 2024 presidential campaign. And investors bet big on a crypto boost from a Trump White House. Indeed, crypto was one of the most prominent ‘Trump trades’. And crypto duly surged after Trump’s win.  

Trump is moving swiftly to deregulate crypto (part of a broader financial deregulation approach), which is helping boost appetite. But the trajectory hasn’t been only one way.  

What accounts for the volatility? It’s impossible to pinpoint precisely, but as FT’s Alphaville argued persuasively, a combination of policy decisions – including a rumoured decision to shut international stablecoin providers off from US treasury markets – and the dawning realisation, in Alphaville’s words, that ‘the pro-crypto Trump administration won’t just be baghodler of last resort’. 

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