Banking The Impact of Central Bank Digital Currencies on Regional Power Dynamics by internationalbanker August 27, 2025 August 27, 2025 3 By Shaanti Shamdasani, President & Chief Economist, S. ASEAN International Advocacy & Consultancy (SAIAC) Will we move to digital currency? Those who are asking this question should reflect on the use of transaction modes such as credit cards, online payments and QR (Quick Response) codes; they are all quasi-digital—in other words, the transaction is transferred and paid using digital technology and means. The efficiency, low cost and convenience this innovation has brought have pushed central banks to further improvise in developing full-fledged digital currencies, or “no-touch money” that is transacted in seconds and is packed with efficiencies and conveniences. Such a shift could redefine traditional financial alliances and reshape the contours of regional power. By moving away from US dollar dependence, countries within BRICS (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates) and beyond may gain enhanced monetary sovereignty and reduce their vulnerabilities to external economic shocks. However, this would also invite critical challenges, including navigating the technological infrastructure for central bank digital currencies (CBDCs), ensuring interoperability between diverse local currencies and establishing trust among participating nations. As digital currencies evolve, their geopolitical ramifications could set the stage for a competitive but collaborative financial order that challenges existing norms, creating ripples in global trade, investment dynamics and financial governance. Let’s look at the evolving payment infrastructure, a decentralized blockchain-based messaging/payment network that aims to connect national systems (for example, China’s CIPS [Cross-border Interbank Payment System], India’s SFMS [Structured Financial Messaging System], Russia’s SPFS [System for Transfer of Financial Messages] and Brazil’s PIX) to enable direct local-currency settlements and bypass SWIFT (Society for Worldwide Interbank Financial Telecommunication) systems. This initiative is inspired by the Bank for International Settlements’ (BIS) mBridge, which focuses on CBDC interoperability and automating inter-CBDC settlements free from dollar dependency. It is also noteworthy to look into the mechanisms of adoption and interoperability—that is, each BRICS member is accelerating national CBDC projects (e.g., digital ruble, digital yuan, e-rupee, digital real, digital rand). With advanced pilots in Russia and China, the efforts to integrate these CBDCs into common platforms such as BRICS Bridge and mBridge will avail real-time cross-border interoperability. The regional impact Fragmented payment systems and multipolar blocs The proliferation of CBDCs is fostering alternative cross-border networks, such as mBridge, and connecting central banks in China, the United Arab Emirates (UAE), Saudi Arabia and others to share liquidity and settle in local digital currencies. This model presents a stark contrast to the single interconnected US dollar system, instead promoting fragmentation into regional blocs defined by their own digital rails. Such a fragmented architecture challenges the dollar’s primacy, shifting economic gravity toward emerging power centers, especially China and other BRICS nations, which gain leverage by offering their currencies and infrastructures as alternatives. Central bank digital currencies are reshaping regional power dynamics by enabling nations to assert digital monetary sovereignty. Central bank digital currencies are reshaping regional power dynamics by enabling nations to assert digital monetary sovereignty. Through issuing their own digital currencies, central banks gain direct control over their domestic money supplies and financial flows, reducing their dependence on private payment networks and the traditional US dollar-dominated systems, such as SWIFT. This sovereignty extends to cross-border transaction systems such as China’s digital yuan that are integrated with platforms such as the BIS’ mBridge, fostering faster and cheaper settlements in local currencies and weakening intermediaries tied to Western financial infrastructure. As a result, countries within regional blocs (for example, the Belt and Road Initiative [BRI] and the Regional Comprehensive Economic Partnership [RCEP]) can bolster economic autonomy while deepening intra-regional trade and influence, ushering in a multipolar financial ecosystem. This shift also introduces new geopolitical levers CBDCs facilitate sanctions evasion and grant issuing states enhanced strategic influence. China’s e-CNY (digital renminbi), for instance, is being promoted in Belt and Road nations as an alternative to dollar-based transactions, granting these countries a credible exit route from US financial reach. Conversely, the United States’ delay, and even outright ban, on a digital dollar under an executive order issued by President Donald Trump has ceded global standard-setting opportunities to Europe and China. CBDCs are thus being weaponized as tools of digital diplomacy Issuing states gain both economic independence and normative sway through interoperability standards and regional CBDC agreements, shaping future trade corridors and alliances. One clear impact on cross-border settlements is most evident in the financials—that is, fees ranging from 0.1 to 0.3 percent versus 0.3 to 0.5 percent for SWIFT, plus the benefit of real-time and same-day settlement. Additionally, local currencies have already dominated bilateral trade (e.g., 90 percent of China-Russia settlements are in non-US dollars). Will BRICS fuel this trend? We have yet to see. Again, a unified BRICS digital currency, a tokenized basket (e.g., “R5”) or a gold-referenced unit, is being explored; however, challenges remain in the areas of fiscal and regulatory integration, converging monetary policies and political consensus. Geopolitical implications and strategic measures By enabling local-currency and CBDC-based trade, BRICS could erode the US dollar’s central role in global payment systems and reduce reliance on the Western dollar, making it “sanction-proof/resistant”. One must admit, despite all these factors, that the dollar’s liquidity and deep penetration remain strong, potentially offsetting BRICS’s push in the near term. CBDCs empower states such as China and Russia to circumvent sanctions and financial scrutiny by rerouting transactions outside US-controlled infrastructures. China’s digital yuan is being strategically integrated into trade with developing nations via the Belt and Road Initiative, expanding its financial influence while chipping away at dollar dependency. This emerging “digital currency cold war” heightens geopolitical tensions. Western powers have responded by enhancing dollar-backed stablecoins and digital-dollar initiatives, aiming to preserve their existing financial dominance. Yet the momentum remains toward a multipolar digital order whereby regional CBDC alliances become critical nodes of influence. In conclusion, central banks worldwide are increasingly focusing on regional cooperation and interoperability as key future directives for digital currencies. While the decision to issue a central bank digital currency remains a sovereign one, there’s a growing recognition that cross-border functionality and harmonized standards are crucial for the success and efficiency of digital payments. Initiatives such as Project mBridge and Project Agorá highlight this trend, bringing together multiple central banks and commercial entities to explore wholesale CBDCs for improved cross-border settlements. The aim is to overcome complexities such as time-zone differences, varying legal frameworks and diverse technical systems, ultimately fostering a more interconnected and efficient global financial landscape. Beyond technical interoperability, future directives will also emphasize the need for coordinated policy approaches to address common challenges such as privacy, cybersecurity and financial stability. Central banks are actively engaging in knowledge sharing and collaborative research, often facilitated by international bodies such as the Bank for International Settlements and the International Monetary Fund (IMF). This collaborative spirit extends to understanding the diverse motivations for CBDC adoption across advanced and emerging economies, ranging from enhancing payment-system efficiency and financial inclusion to preserving monetary sovereignty. The ongoing dialog and joint efforts are shaping a future in which regional digital-currency responses are not isolated but rather part of a broader, globally coordinated effort to navigate the evolving digital monetary order. ABOUT THE AUTHORShaanti Shamdasani is President and Chief Economist at S. ASEAN International Advocacy & Consultancy (SAIAC), advising on economics, geopolitics, defence and investment across Asia-Pacific and beyond. A frequent media commentator and international speaker, she is also a visiting lecturer at Cornell University and has appeared in nearly 90 broadcast interviews globally. Go to top Bank for International Settlements (BIS)BankingBelt and Road Initiative (BRI)Central Bank Digital Currencies (CBDC)International Monetary Fund (IMF)Project AgoráProject mBridgeS. 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