TechXGeopolitics #6: Crypto’s Elite Capture? Cryptocurrencies’ Role in the CBDC Pilot Race
Also featured: New Unlimited Hangout article, drone start-ups and extreme military recruitment efforts in Ukraine
By Stavroula Pabst
Welcome to my newsletter, where I set out to highlight significant, yet un- or underreported recent news and trends at the intersection of geopolitics and tech.
Why the intersection of technology and geopolitics? The future of geopolitics will be shaped by today’s tech advances, yet the two topics are often isolated from one another in journalism and geopolitical analysis. This newsletter strives to bridge the gap while also spotlighting relevant work by emerging and veteran writers in independent media.
Feedback on this newsletter’s format and content is more than welcome — please feel free to comment on this page, or write to me at stavroula.pabst@proton.me. Thank you for reading!
“By simultaneously driving CBDCs and adjacent projects forward, crypto players like Ripple, Stellar, and Ethereum demonstrate they (or those who have influence over them) care little about financial inclusion, privacy, or freedom. Rather, their goal is to have a stake in, or even control over, the future global financial system.”
As CBDCs Roll-Out, Elite-Backed Digital Payment Systems Vie to Build the “Global Payment Standard”: Despite growing concerns that Central Bank Digital Currencies (CBDCs), a digital version of a fiat currency facilitated by the central banks, could make financial transactions easy to surveil and even manipulate or control by governments, CBDCs are being considered almost unilaterally by nation states. Namely, the Atlantic Council’s CBDC tracker reports that “130 countries, representing 98 percent of global GDP, are exploring a CBDC.”
But, who else is involved in CBDCs? As I discuss in a new article for Unlimited Hangout, major cryptocurrency players. Indeed, Ethereum, Stellar, Ripple, and others are frequently participating in or otherwise being used for CBDC pilots proliferating across the globe.
While they often proclaim their body of work and their CBDC-adjacent efforts are advancing the cause of “financial inclusion,” a deeper dive reveals that those running the show at or otherwise influencing major crypto protocols, such as Stellar, Ethereum, and Ripple seem to have other motives: namely, a stake in the future financial system. (While Ethereum differs in that no one “owns” the Ethereum protocol, the protocol’s recent “proof-of-work” to “proof-of-stake” merge has left it especially vulnerable to elite capture: as a recent JP Morgan report described the circumstances, the “concentrated number” of stakeholders precipitated by Ethereum’s 2022 merge could theoretically “collude to create an oligopoly that would promote their own interests at the expense of the interests of the community.”)
As I elucidate in the article, the circumstances must force speculation as to whether, and to what extent, cryptocurrencies have been created or developed “as a kind of precursor to, or testing ground for, CBDCs, where the technologies needed for a central bank-issued digital currency could first be tested out and perfected in the private sector before coming under the complete dominion of central banks.”
Learn more by reading my article in full on Unlimited Hangout.
“A former partner of Farmington State Bank, the tiny rural bank embroiled in the FTX scandal, is now building the rails for CBDCs in the Middle East and beyond. Their recent activities may finally reveal the true motives behind Sam Bankman-Fried’s and his allies’ use of Farmington, with major implications for the coming Digital Dollar.”
–Mark Goodwin and Whitney Webb
Unmasking Farmington: FTX, Fluent Finance and the Coming Digital Dollar: In a new article for Unlimited Hangout, Mark Goodwin and Whitney Webb analyze former FTX scandal affiliates’ activities building CBDCs and adjacent financial infrastructure. (You can learn more about the now-bankrupt cryptocurrency exchange FTX here and FTX scandal here, here and here.)
Namely, Goodwin and Webb highlight that relatively unknown financial group Fluent Finance appears quite busy developing critical digital financial infrastructure and securing economic and governmental partnerships, all with scant media coverage. Two especially important efforts in this respect include the Fluent Protocol and the US+ stablecoin, where Fluent describes the Fluent Protocol as “a financial network that seamlessly bridges traditional finance and digital assets,” and the US+ stablecoin as a “bank-led”, US dollar-pegged stablecoin “built on principles” that are “forward-compatible with CBDC initiatives.”
Analyzing the history of Fluent Finance and its ongoing efforts in the finance space, Goodwin and Webb argue the organization is an “apparent front” for major financial players who are looking to tailor the future (digital) financial system to their needs. In particular, Farmington Bank/Moonstone Bank, which subsequently became embroiled in the FTX scandal, was likely slated to work with Fluent Finance to bring the US+ stablecoin, a kind of “digital dollar,” to market. Despite the speedbumps arising with crypto exchange FTX’s collapse, Goodwin and Webb report that “Fluent Finance has [still] continued in pursuit of its ultimate goal – to create a “trusted” stablecoin and stablecoin protocol on behalf of the commercial banking giants it was always intended to serve.”
In other words, Fluent Finance is an elite-backed group looking to create financial structures conducive to the needs of the power elite, especially with regards to bank-owned and -operated stablecoins that could be used like a CBDC, except now facilitated by a private banking sector perhaps less accountable to the public (than, per se, a central bank may be due to its nature as a public institution).
Indeed, in the United States, Goodwin and Webb posit the US may well have a Digital Dollar CBDC equivalent in the future where the private sector, as opposed to the Federal Reserve Bank, will be taking on the potential for CBDCs’ most questionable qualities, including surveillance and programmability. And as their reporting suggests, elite-gilded groups like Fluent Finance, and previously Farmington Bank/Moonstone (which appears to have been, in a sense, hijacked for the cause), appear eager to make such arrangements reality.
To conclude, concerns about CBDCs’ prospects for major societal harms (i.e. surveillance, financial manipulation and even control via the programmability of digital money) must also be applied to adjacent arrangements, especially those facilitated through the private sector, that could arise with the proliferation of digital currencies in the years to come.
“It seems as though half the population is building drones in their spare time. Recently a friend of mine opened the trunk of his car to show off two ovoid plastic objects.”
– Wendell Steavenson, The Economist
Ukraine’s Drone Craze: As conflict continues, Ukrainians are turning to mass drone production to keep up the war effort, further normalizing autonomous and semi-autonomous drone systems’ (increasingly lethal) roles in combat. Indeed, DW reported that Ukraine’s drone production has increased 100-fold since the start of the war in early 2022.
The Ukrainian government says that there are about 200 companies officially making drones, with a number of smaller, unofficial projects across the country carrying out similar work. Indeed, a myriad of small start-ups and entrepreneurs have launched drone-making businesses in Ukraine in the hopes of securing government contracts.
In other cases, wealthy investors from abroad are stepping in: as I had highlighted in previous Unlimited Hangout reporting, former Google CEO and serial venture capitalist Eric Schmidt has “invested heavily into the Dare to Defend Democracy (D3) Military Tech Accelerator, an accelerator for Ukrainian-based defense start-ups that describes itself as helping “Ukraine defende [sic] democracy and win through tech, turn the winning solutions into global success stories.”
Meanwhile, in addition to semi-autonomous and lethal drones, other state-of-the-art technologies, including surveillance systems and AI-powered targeting systems, are becoming normalized in wartime in Ukraine as well as in Israel’s ongoing assault on Gaza.
I noted in recent reporting for Unlimited Hangout that controversial Peter Thiel-linked tech and defense groups, like Palantir, Anduril, and facial recognition tool Clearview AI are ultimately using the Ukrainian battlefield as a test-bed for their latest war-technologies, which are often AI-powered.
As I recently reported in Al Mayadeen English, furthermore, Israel is using “The Gospel,” an AI-powered tool, to identify targets in Gaza at a much faster rate than traditional human intelligence. The apparatus has assisted Israel’s demolition of Gaza, where Israel has dropped about 29,000 bombs on Gaza at the time of writing, destroying about 70% of residential buildings. In other words, The Gospel is a digital tool for mass destruction.
Ultimately, questionable and lethal technologies that make war less “personal” are becoming the status quo as conflicts rage in Ukraine and in the Middle East, all with little public discussion as to their moral and ethical ramifications.
“It’s a war for poor people.”
– An anonymous Ukrainian lawyer
‘People Snatchers’: Ukraine’s Recruiters Use Harsh Tactics to Fill Ranks: As casualties on the battlefield mount and prospects for victory worsen, Ukraine is widening its recruitment pool, proposing lowering the age of those eligible to fight from 27 to 25.
Meanwhile, Ukrainian military recruitment tactics are becoming more extreme and are often illegal, leading to court cases. According to NYT reporter Thomas Gibbons-Neff, recruiters are confiscating passports, removing people from their workplaces, and even physically grabbing civilians off the street.
Fearing recruitment and combat, many are trying to get out of such obligations by bribing medical professionals and military higher-ups. In other words, those with cash are often able to get out of military time while Ukraine’s poor are sent to battle.
Thanks for reading my work!
As we head into the new year, I plan to publish frequent newsletters and other research on this Substack, especially at the intersection of geopolitics and technology. To do so, I need your help! Please consider a monthly or yearly subscription if you are able, as it helps me to continue this work without a paywall.
I completely understand many may not be able to commit to a full 8 USD per month or 80 USD per year, which is why, through January 10th, I am offering a discounted paid subscription that’s 40 percent off for the year! Click here to redeem this limited-time offer.
Thank you for your support!
This is one of the most important posts on Substack, full stop. Financial transformation for good or ill is
happening fast now.