Political Economy

G04 - Cryptocurrency and (international) political economy

Date: Jun 3 | Time: 01:45pm to 03:15pm | Location:

Chair/Président/Présidente : Antulio Rosales (York University)

Discussant/Commentateur/Commentatrice : Antulio Rosales (York University)

Repairing broken linkages: Russia’s use of cryptocurrencies in response to sanctions: Viktoriya Vinik (York University), Antulio Rosales (York University)
Abstract: The United States and western European allies imposed tough international sanctions on Russia amid the latter’s invasion of Ukraine in 2022. These restrictions imposed on Russia’s economy included a draconian closure of the banking and financial system to most Russian banks aimed at limiting its war effort. The international relations literature on the efficacy of sanctions to induce behaviour change points to their scant success. However, the effects of sanctions are varied and are still rarely understood. In this context, cryptocurrencies have recently been used as tools to bypass trade and financial limitations, including sanctions. In this article, we interrogate Russia’s use of cryptocurrencies amid the sanctions’ regime imposed on the country from 2022. We find three main uses of cryptocurrencies in the post-invasion context: first, Russia has accepted cryptocurrencies for cross-border payments, especially of oil; second, Russia uses bitcoin as a crowd-funding tool in its war effort, including by some of its more extremist battalions; and lastly, Russian oligarchs and wealthy individuals seem to be increasingly using bitcoin as a way to safeguard their financial positions away from US dollars and other major currencies. Importantly, while cryptocurrencies are not drastically changing the financial networks through which the Russian economy is connected, these assets are purportedly repairing some of the broken linkages generated by the sanctions’ regime.

Contested sovereignty: Kosovo’s bitcoin mining ban: Tefik Agushi (York University)
Abstract: In 2022, Kosovo authorities declared a ban on bitcoin mining to curb electricity consumption. In recent years, the country had experienced a rapid increase in consumption, problems with energy supply and increasing costs. The decision was the result of public protests over higher costs and blackouts, which re-ignited tensions between the country’s authority and its ethnic Serbian minority. Neither Serbia nor ethnic Serbs in Kosovo recognize the country’s independence; in consequence, residents of northern areas of Kosovo, where most ethnic Serbs live, to refuse to pay electricity, which in turn has produced enormous distortions and high costs. Among them, booming bitcoin mining activity became common in these communities. In this article, we explore how bitcoin mining exposes the electricity infrastructure’s fragility of this territory, but more importantly, it unveils the complexities of contested sovereignty claims by Kosovo’s authorities and Serbia. The article demonstrates how the exercise of sovereignty is intimately linked to the provision, control, guarantee and deployment of energy and its infrastructure. Contested sovereignty claims highlight the role of supra-national entities such as the European Union as well as the role of rarely considered materialities such as electricity installations and energy resources.

CBDCs in South America: a political economy analysis of structural constraints and financial infrastructure challenges: Mauricio Collao Quevedo (York University)
Abstract: Central Bank Digital Currencies (CBDC) have recently surged as state responses to the spread of decentralized digital currencies and other financial technologies, which seem to pose a threat to national fiat monies. Scholars in International Political Economy (IPE) have highlighted the infrastructural dimension of this innovation, the security motivations for their creation and the overall importance of CBDCs in upholding state sovereignty in international finance. South American Central Banks have also entered the terrain of CBDC initiatives and while they share similar motivations, CBDCs initiatives in the region take different forms. Bypassing sanctions, establishing alternative links and building counter-hegemonic financial blocs, as well as attempting to bring renewed confidence in eroded national currencies are part of the reasons for CBDC initiatives in countries such as Brazil, Venezuela and Argentina. These initiatives have varying degrees of success, with projects lagging in comparison to China and the Euro zone. Building on IPE literature on CBDCs, this paper provides an overview of the motivations for South American CBDC initiatives. It emphasizes the importance of structural constraints in the regional economies as well as the infrastructural challenges that affect financial sectors in the region as the bases for South American CBDCs particularities.

Cryptocurrency, Neoliberalism, and the Globalization of Money: James Patriquin (Carleton University)
Abstract: In this paper I outline a global political economy framework for understanding the sudden and meteoric rise of cryptocurrency. My framework displaces traditional issues of sovereignty and state preference and approaches money through a historical lens, enabling cryptocurrency to be linked to a longer periodization and broader morphology of economic liberalism. My argument is that cryptocurrency is not a deviant or alternative currency but a macroeconomic phenomenon which has emerged in response to perceived inadequacies of the global money supply. In this way, the governance of money’s scarcity is reimagined as an event subject to both regulation and resistance: a political technology and ‘economy of security’ through which particular actions can be brought into conformity with a prescribed ideal. This approach enables my analysis of cryptocurrency as an instrument of monetary liquidity and contumacious global currency which has met a growing demand for efficient payments. The first section theorizes cryptocurrency against a background of neoliberal restructuring, illustrating familiar processes of privatization, securitization, and deterritorialization as preconditions for the creation of a monetary mechanism more appropriate for a neoliberal world order. The second section consists of a case study of Bitcoin’s globalized production process and payment mechanism, which enable its proof-of-work system to generate confidence in, and demand for, a steady output of digital currency units. The final section links cryptocurrency to the neoliberal form of global political economy, illustrating a range of emergent dynamics relating to social production, global governance, monetary reserves, capital mobility, and external adjustment.