Detailed Edition：Instability of the Petrodollar System and the Credibility of the U.S. Dollar as the Global Reserve Currency

May 16, 2026
Published by: Middle East Asia Strategic Intelligence Institute
Author: Akinobu Kinoshita

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Introduction

Those who control finance control resources, and those who control resources control the world.
What has become clear through the recent Iran War is the crisis of the petrodollar system.

For decades, global oil transactions required the use of the U.S. dollar as the world’s reserve currency. However, the emergence of the “petroyuan” — the use of the Chinese renminbi in oil transactions — is now challenging that structure.

Economic sanctions are not weapons of mass destruction, yet they are weapons capable of destroying economies.
When a nation invades another nation’s territory, it becomes war. Currency hegemony is another form of war.

During the recent diplomatic negotiations, the Taiwan issue has once again drawn international attention. Taiwan possesses its own central bank, military, and passport system, while simultaneously functioning as part of the U.S. dollar alliance structure. Observing arms transactions alone makes clear the existence of a Taiwan–U.S. strategic alliance.

On May 14, 2026, a summit meeting was held between U.S. President Donald Trump and Chinese President Xi Jinping.
What deserves attention is not merely the diplomatic meeting itself, but the composition of the accompanying American corporate delegation.

According to White House officials, participating companies included Tesla (Elon Musk), Apple (Tim Cook), Boeing (Kelly Ortberg), Goldman Sachs (David Solomon), Citigroup (Jane Fraser), BlackRock (Larry Fink), Blackstone (Stephen Schwarzman), Meta, Mastercard, and Qualcomm — corporations representing finance, AI, semiconductors, telecommunications, and aerospace industries.

The world is now transitioning toward digital currencies.

The structure of reserve currency hegemony suggests that U.S.–China confrontation is no longer merely a “trade dispute.” As evidenced by the composition of the accompanying corporate leaders, the conflict has entered a new strategic phase centered on the “global reserve currency system” and “digital financial hegemony.”

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Executive Summary

1. Instability of the Petrodollar System and the Turning Point of Dollar Hegemony

This report argues that the U.S. dollar-centered monetary order, sustained since the 1970s through the “oil-for-dollar settlement system,” is reaching a structural turning point due to the Iran War, sanctions against Russia, and the expansion of BRICS. In particular, the expansion of the “petroyuan” — renminbi-denominated resource settlements — is identified as a core factor destabilizing the dollar recycling system.

2. China Is Challenging Hegemony Through Financial Infrastructure Rather Than Currency Alone

China is constructing an independent financial settlement sphere through systems such as CIPS (Cross-Border Interbank Payment System), the digital renminbi (e-CNY), and mBridge, bypassing SWIFT and CHIPS. This is not merely a currency competition but the creation of a “financial operating system immune to U.S. sanctions,” expanding across BRICS, the Middle East, ASEAN, and Africa.

3. Global Finance Is Transitioning Toward Multipolarity

The current international financial order is shifting toward a tripolar structure:

1. The Dollar Bloc (centered on the United States, Japan, and the United Kingdom)
2. The Renminbi-BRICS Bloc
3. The Euro Bloc

Countries are increasingly caught between the “risk of U.S. sanctions” and the “risk of Chinese surveillance,” accelerating the development of their own digital currencies and payment infrastructures.

4. Digital Currency Hegemony Represents a “Financial Cold War”

The struggle surrounding CBDCs (Central Bank Digital Currencies) is no longer merely a competition over payment technology. It has evolved into a three-way geopolitical contest:

• China Model: state control, surveillance, and sanctions evasion
• G7 Model: rule of law, privacy protection, and decentralized governance
• Web3 Model: borderless decentralized currencies beyond nation-states

At the core of this conflict lie data sovereignty and financial sovereignty.

5. The Emergence of an Era of “Financial Security” Including Cyberwarfare, AI, and Submarine Cables

This report portrays reserve currency conflict as an integrated war consisting of economic warfare, cyberwarfare, and AI hegemony. SWIFT, submarine cables, cloud infrastructure, data centers, AI, and crypto assets are becoming new strategic infrastructures, transforming currency hegemony itself into a matter of national security.

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Keywords

1. Petrodollar / Petroyuan
2. BRICS and De-dollarization
3. CIPS and Digital Renminbi (e-CNY)
4. CBDCs and Financial Infrastructure Hegemony
5. Bretton Woods III and Commodity-Backed Monetary Systems

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Table of Contents

Introduction

• The Petrodollar Crisis and Currency Hegemony
• U.S.–China Rivalry and Digital Financial Warfare

Chapter 1: What Is the Petrodollar System?

• Collapse of Bretton Woods
• Formation of the Oil-Dollar System
• Dollar Recycling Structure

Chapter 2: Military and Diplomatic Developments Surrounding Iran and the Limits of Economic Sanctions

• The Iran War and the Strait of Hormuz Crisis
• The Effectiveness and Limits of Sanctions
• Sanctions Evasion Networks

Chapter 3: The Postwar Order Supporting Dollar Hegemony

• The Postwar Dollar System
• The Asian Financial Crisis
• The AMF Initiative and Monetary Regionalism
• China’s Dollar-Peg Strategy
• Continuity with the BRICS Initiative
• Cyberwarfare and Financial Infrastructure

Chapter 4: China’s Strategy for Reserve Currency Hegemony

• CIPS (Renminbi Settlement Network)
• Digital Renminbi (e-CNY)
• The mBridge Initiative
• The Petroyuan Strategy
• Russia, the Middle East, and Emerging Economies
• Implications for the Japanese Yen and the Euro
• Digital Yen and ASEAN Strategy
• The Tripolarization of Global Finance in 2026

Chapter 5: The BRICS Currency Initiative and the Gold Standard

• BRICS PAY
• Blockchain-Based Settlement Systems
• Gold- and Commodity-Backed Currencies
• Japan’s Strategic Dilemma

Chapter 6: Renminbi, Digital Currency, and AI Hegemony

• Mechanisms for Sanctions Evasion
• The Belt and Road Financial Sphere
• China’s Surveillance-Oriented Financial System
• Bretton Woods III
• Transition Toward Commodity-Backed Monetary Systems

Chapter 7: Countering China’s Digital Currency Surveillance

• G7 CBDC Principles
• The Digital Euro
• The DFFT Initiative
• The Structure of a Financial Cold War

Chapter 8: The Impact of Privately Issued Digital Currencies

• Stablecoin Strategies
• The Digital Dollar Initiative
• Bitcoin and Digital Gold
• The Three-Way Currency War

Chapter 9: The Destabilization of the SWIFT System and Cyberwarfare

• Submarine Cables and Cloud Dominance
• Cyberwarfare and Economic Warfare
• AI and Digital Currency Hegemony
• The Strategic Nature of U.S.–China Negotiations

Chapter 10: Japan’s Strategic Challenges

• Financial Security
• Defense of the Yen
• Energy Security
• Sovereignty in AI and Semiconductors
• Cyber Defense
• An Autonomous U.S.–Japan Alliance
• Comprehensive Geoeconomic Strategy

Chapter 11: The End of the Postwar Financial Order, Gold Reserves, and Japan

• The Gold Reserve Issue
• Germany’s Gold Repatriation
• Post-Bretton Woods Reorganization
• Japan’s Gold Strategy
• National Credibility in a Multipolar Currency Era

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Chapter 1: What Is the Petrodollar System?

In 1971, Richard Nixon suspended the convertibility of the U.S. dollar into gold, leading to the collapse of the Bretton Woods system. Under normal circumstances, the dollar — having lost its gold backing — should have lost international credibility. However, during the 1970s, the United States concluded security agreements with Gulf oil-producing states centered on Saudi Arabia and established a system in which crude oil transactions would be conducted in U.S. dollars.

International political economist David E. Spiro described this structure as follows:

“The recycling of petrodollars became central to the stability of the dollar system.”
— David E. Spiro, The Hidden Hand of American Hegemony (Cornell University Press, 1999)

Through this “petrodollar system,” the following circulation structure was established:

• Countries around the world held U.S. dollars in order to purchase oil 
• Gulf states reinvested surplus dollars into U.S. Treasury bonds 
• The United States was able to issue dollars despite massive fiscal deficits 
• The U.S. military maintained its global military deployment structure 

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Chapter 2: Military and Diplomatic Developments Surrounding Iran and the Limits of Economic Sanctions

On February 28, 2026, the United States and Israel launched a military operation against Iran (“Operation Epic Fury”), resulting in the deaths of several senior officials, including Iran’s Supreme Leader, Ayatollah Khamenei.

Iran subsequently retaliated against U.S. military bases and Gulf oil facilities across the Middle East, while also declaring the closure of the Strait of Hormuz, escalating the conflict into a large-scale regional military confrontation.

On April 8 of the same year, a conditional ceasefire was declared. As of May 2026, nuclear negotiations mediated by Pakistan, along with talks regarding the reopening of the Strait of Hormuz, remain ongoing.

2-1. The Effectiveness and Limits of Sanctions: A Dual Assessment

The key issue examined in this paper is the accurate evaluation of both the effectiveness and limitations of the sanctions policy that preceded this conflict.

On one hand, sanctions severely weakened the Iranian economy. The activation of the United Nations “snapback” sanctions in September 2025, the collapse of the Iranian currency later that year, and nationwide protest movements in early 2026 all demonstrate that sanctions inflicted substantial damage on the Iranian state system.

On the other hand, sanctions failed to force Iran into immediately accepting a nuclear agreement or bringing about regime change. Economist Nicholas Mulder analyzed this issue as follows:

“Sanctions rarely compel immediate surrender; instead they reshape global networks.”
— Nicholas Mulder, The Economic Weapon (Yale University Press, 2022)

In other words, economic sanctions are an effective instrument of pressure, but they have clear limitations when used alone to fully subjugate a state. The experience of sanctions against Russia demonstrates a similar structure.

Attention should therefore be paid to how these limitations are accelerating the expansion of sanctions-evasion networks through non-dollar settlement systems, crypto assets, and third-country trade routes.

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Chapter 3: The Postwar Order Supporting Dollar Hegemony

Following the end of the Second World War, the United States emerged as the only major industrial power whose homeland had not become a battlefield, thereby acquiring overwhelming industrial production capacity. Historian Paul Kennedy stated:

“Industrial and financial capacity ultimately determine great power status.”
— Paul Kennedy, The Rise and Fall of the Great Powers (1987)

The postwar international order shifted from the British pound sterling system to the U.S. dollar system.

After the war, Japan developed an export-oriented economy supported by a fixed exchange rate system, access to the U.S. market, and relatively inexpensive labor, achieving rapid economic growth. However, as the yen appreciated, floating exchange rates expanded, and labor costs increased, manufacturing bases gradually moved to South Korea and Taiwan. Eventually, these technologies and production networks shifted further into China, which became “the world’s factory.”

3-1. The Asian Financial Crisis and Japan’s Asian Monetary Initiative

The Asian Financial Crisis of 1997 was a historic event that revealed both the vulnerability and the dominance of the dollar-centered monetary system across Asia. The crisis began with the collapse of the Thai baht. Unable to maintain its fixed exchange rate system, Thailand abandoned the dollar peg in July 1997.

Economist Joseph E. Stiglitz stated:

“The East Asian crisis exposed the dangers of premature financial liberalization under global dollar dependency.”
— Joseph E. Stiglitz, Globalization and Its Discontents (2002)

One of the most important aspects of the crisis was that not only governments, but also massive speculative capital flows destabilized currency markets.

3-2. Japan’s Asian Monetary Fund (AMF) Proposal

In response to the crisis, Japan proposed an independent regional financial framework known as the Asian Monetary Fund (AMF). However, the proposal collapsed due to strong opposition from the United States and the International Monetary Fund (IMF).

International political economist Benjamin J. Cohen observed:

“Monetary regionalism in Asia was viewed in Washington as a strategic challenge to dollar supremacy.”
— Benjamin J. Cohen, The Future of Money (2004)

Professor Cohen’s statement accurately illustrates how early 2000s efforts toward independent Asian monetary integration and regional financial cooperation were perceived in Washington as a strategic threat to U.S. dollar hegemony.

The continuing quasi-peg of the Chinese renminbi to the U.S. dollar is deeply connected to this geopolitical struggle over dollar supremacy.

3-3. Why “Asian Monetary Regionalism” Became a Threat to the Dollar

Lessons of the Asian Financial Crisis (1997)

Countries such as Thailand and South Korea were forced by the IMF to adopt severe austerity measures, resulting in economic hardship. Since the IMF headquarters is located in Washington and strongly influenced by U.S. policy preferences, many Asian countries concluded that dependence on the United States and the IMF endangered national sovereignty. Consequently, they sought to establish regional financial networks independent of the U.S. dollar.

The AMF Proposal

Japan’s proposed Asian Monetary Fund aimed to create a mechanism capable of rescuing Asian economies without relying on the United States or the IMF. However, the United States strongly opposed the proposal out of concern that it would weaken dollar dominance, ultimately preventing its realization.

The Chiang Mai Initiative (2000)

Subsequently, Japan, China, South Korea, and ASEAN countries established currency swap agreements under the Chiang Mai Initiative. This represented a concrete example of what Cohen referred to as “monetary regionalism.” Washington viewed the initiative as a potential stepping stone toward a future Asian common currency — an “Asian euro” — and therefore as a move toward excluding the dollar from regional finance.

3-4. Why Countries Abandoned the Dollar Peg System

Impact of Dollar Depreciation

When the United States experienced economic downturns and the dollar weakened, countries maintaining dollar pegs also experienced currency depreciation, leading to rising import prices and inflation.

Dependence on U.S. Interest Rate Policy

Countries tied to the dollar were effectively forced to follow U.S. interest rate policies, limiting their ability to implement monetary policies appropriate for domestic economic conditions.

Vulnerability to Speculative Attacks

Once the limits of foreign exchange intervention were exceeded, the risk of sudden currency collapse increased dramatically.

As a result, many countries gradually shifted toward managed floating exchange rate systems or currency basket systems better suited to economic maturity and resistance to external shocks.

3-5. Why the Chinese Renminbi Remains Effectively Pegged to the U.S. Dollar

The Chinese renminbi and the U.S. dollar remain closely linked through a quasi-fixed exchange rate system.

Although China officially announced a transition to a “currency basket system” in 2005, the renminbi continues to function as a de facto dollar peg because the Chinese government and the People’s Bank of China strictly manage exchange rates through market intervention.

China intentionally maintains strong linkage with the dollar for four primary reasons:

Maintaining Export Competitiveness and Trade Stability

China’s economy continues to depend heavily on exports. By stabilizing the exchange rate against the U.S. dollar — the world’s primary trade settlement currency and China’s largest trading counterpart — China minimizes foreign exchange risk for exporters and enables predictable trade planning and stable profits.

Preventing Capital Flight Through Strict Controls

China seeks to avoid both rapid appreciation and depreciation of the renminbi. A fully liberalized floating exchange system could trigger massive capital flight during domestic economic downturns, threatening the stability of China’s financial system. Therefore, the government tightly restricts cross-border capital movement while maintaining a quasi-fixed exchange rate.

Strong Intervention Through the “Central Parity Rate” and Trading Band

Each morning, the People’s Bank of China announces a central parity rate serving as the benchmark for daily trading. Market movements are permitted only within a limited range around this benchmark (for example, ±2%). If exchange rates approach the permitted limits, the government and state-owned banks intervene through large-scale dollar purchases or renminbi sales to force rates back within the designated range.

Internationalization of the Renminbi Through Dollar Stability

By linking the renminbi to the highly trusted U.S. dollar, China promotes the perception among developing and neighboring countries that the renminbi is a stable “hard currency” suitable for international settlements. In effect, China uses the credibility of the dollar as a shield while gradually expanding the international influence of its own currency.

In practice, although China officially describes its system as a “managed floating exchange rate system referencing a currency basket,” the reality is that the government forcibly maintains the renminbi within a controllable range closely aligned with the dollar.

3-6. The Strategic Significance of China’s Dollar Peg

China’s decision to keep the renminbi closely tied to the dollar is not merely about trade stability; it also serves as a defensive strategy and preparation period in the broader struggle over monetary hegemony with the United States.

Utilization of the “Financial Trilemma”

According to international finance theory, free capital movement, independent monetary policy, and fixed exchange rates cannot all coexist simultaneously. China deliberately sacrifices free capital mobility through strict controls, thereby preserving both exchange rate stability with the dollar and independent domestic monetary policy.

A Defensive Barrier Against U.S. Financial Pressure

If China fully liberalized the renminbi into a floating exchange rate system, U.S. hedge funds and speculative capital could rapidly attack the currency and potentially trigger a financial crisis. By maintaining linkage with the dollar, China preserves economic sovereignty while carefully monitoring U.S. financial behavior.

China’s dollar peg can therefore be understood as a form of strategic concealment: while remaining partially dependent on the U.S.-led international financial system — often referred to as the “Washington Consensus” — China simultaneously uses that system to accumulate power from within in preparation for eventual independence from dollar dominance.

3-7. Continuity Into the 2020s: China’s “Quiet Challenge” to Dollar Hegemony

As Benjamin Cohen anticipated in 2004, China is now advancing a direct challenge to dollar supremacy through a strategy of de-dollarization.

Promotion of the Digital Renminbi (e-CNY)

China is constructing independent payment networks that bypass U.S.-dominated financial infrastructure such as SWIFT.

Use of the Renminbi in BRICS and Bilateral Settlements

China is expanding renminbi-denominated settlements for oil and resource transactions with countries such as Russia and Middle Eastern states including Saudi Arabia.

3-8. Historical Continuity with BRICS

The current BRICS currency initiative is deeply connected to the lessons of 1997 — namely, the recognition that dependence on the dollar constitutes a national security risk.

The Asian Financial Crisis, the freezing of Russian assets, sanctions against Iran, and exclusion from SWIFT all demonstrated to the world that countries controlling the dollar effectively control the international financial order.

3-9. Supplement: Cyberwarfare and Financial Infrastructure

In the field of cybersecurity, multiple research institutions have warned about the increasing sophistication of cyberwarfare capabilities by China, Russia, and North Korea, particularly regarding attacks targeting financial systems.

A growing body of analysis argues that next-generation warfare will involve hybrid attacks simultaneously targeting finance, communications, AI systems, electricity networks, and logistics infrastructure. Chinese military cyber units, Russian-linked hacking networks, North Korean cryptocurrency theft operations, and SWIFT infiltration attacks are increasingly viewed as components of an integrated strategic threat.

The Japan Institute for Crisis Management (inst-ds.org) has published reports from this perspective. However, it should be noted that the organization is a nonprofit entity whose founding background, peer-review system, and funding transparency remain only partially disclosed publicly. Accordingly, its analyses should be evaluated comprehensively alongside materials from government and academic institutions such as RAND Corporation and Japan’s National Institute for Defense Studies.

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Chapter 4: China’s Strategy for Reserve Currency Hegemony

At present, the BRICS countries are seeking to reduce their dependence on the U.S. dollar. Behind this movement lies growing concern over the risks of U.S. sanctions, dependence on SWIFT, the freezing of foreign exchange reserves, and the loss of financial sovereignty. In particular, the freezing of Russian sovereign assets sent shockwaves throughout many non-Western nations.

Economist Jacques Sapir observed:

“The freezing of sovereign reserves shattered confidence in the neutrality of the dollar system.”
— Jacques Sapir, Russian Economic Resilience (2023)

As a result, discussions surrounding increased gold holdings, non-dollar settlements, central bank digital currencies (CBDCs), and gold-backed currency frameworks have accelerated rapidly.

This chapter provides a detailed explanation of the independent financial infrastructure China is building to challenge U.S. dollar hegemony: the “CIPS” (Cross-Border Interbank Payment System) and the “Digital Renminbi” (e-CNY).

Together, these systems function as dual pillars designed to bypass and supplement U.S.-dominated financial infrastructure such as SWIFT while directly expanding the global economic sphere of the renminbi.

4-1. What Is CIPS (Cross-Border Interbank Payment System)?

CIPS (Cross-Border Interbank Payment System) is an international settlement and remittance network dedicated to the renminbi, launched by China in 2015.

A Settlement Network Designed to Compete with SWIFT

Most global settlements are currently processed through CHIPS, dominated by U.S. banks, or through the Western-led SWIFT network. The United States has used these systems as instruments of sanctions policy, as demonstrated by Russia’s exclusion from SWIFT.

By contrast, CIPS functions as an independent financial “escape route” through which transactions cannot easily be monitored or blocked by the United States.

Rapid Growth and Expansion of Transactions

By 2025, CIPS annual transaction volume had reportedly reached approximately 175–180 trillion yuan (over 24 trillion U.S. dollars). Furthermore, geopolitical tensions such as conflicts in the Middle East and Ukraine have accelerated efforts to avoid the dollar, contributing to the rise of the “petroyuan.”

In March 2026, daily transaction volume reportedly reached a record 1.22 trillion yuan (approximately 178.5 billion U.S. dollars), demonstrating rapid growth in global market share.

Global Expansion

More than 5,000 banks across over 190 countries and regions — including both direct and indirect participants — are now connected to CIPS. Usage has expanded particularly across Southeast Asia, the Middle East, Russia, Africa, and resource-producing nations in South America.

4-2. The International Expansion of the Digital Renminbi (e-CNY)

The Digital Renminbi is a central bank digital currency (CBDC) issued by the People’s Bank of China.

In January 2026, China implemented a major system integration known as “Digital Renminbi 2.0,” upgrading the currency from a “cash-equivalent” instrument to a deposit-based digital currency. Features such as interest-bearing wallet balances significantly enhanced usability.

Breaking Cross-Border Barriers Through “mBridge”

China is leading the “mBridge” cross-border payment initiative in cooperation with the central banks of Thailand, the United Arab Emirates, and Hong Kong.

This project aims to establish cross-border settlements without intermediary banks such as U.S. financial institutions. Approximately 95% of international settlements conducted within this network are reportedly settled using the Digital Renminbi, giving China overwhelming influence within the system.

Expansion of Retail Payments in Neighboring Countries

In tourism zones and border trade regions across Laos, Thailand, Cambodia, Vietnam, and Singapore, local QR-code payment systems are increasingly being integrated with Digital Renminbi wallets.

This infrastructure enables Chinese users to make direct renminbi-based payments abroad without using the U.S. dollar as an intermediary.

4-3. The “Real Threat” to Dollar Hegemony

As Professor Benjamin J. Cohen pointed out, Washington’s greatest concern is that China may complete an independent economic and payment sphere beyond the reach of U.S. intervention.

Category	Traditional Dollar System (SWIFT / CHIPS)	China’s Independent System (CIPS / e-CNY)
Leadership	United States (financial sanctions enforceable by the Treasury Department)	China (outside U.S. legal and sanctions jurisdiction)
Settlement Currency	Requires the U.S. dollar as intermediary	Direct renminbi settlement via bilateral currency swaps
Settlement Speed	May require several days due to intermediary banks	Near-instant settlement through blockchain and digital infrastructure
Transaction Monitoring	U.S. authorities can track money laundering and sanctions violations	Monitoring controlled primarily by Chinese security and financial authorities

4-4. Remaining Challenges: Why the Renminbi Has Not Yet Overtaken the Dollar

Despite these infrastructure developments, the renminbi still accounts for only around 2% of global foreign exchange reserves, far below the dollar’s share exceeding 50%.

The primary reason lies in China’s strict capital controls.

For foreign corporations and governments, the renminbi may be convenient for settlement purposes, but there remain significant restrictions on converting renminbi holdings into other assets or moving funds freely across borders. As a result, the dollar and euro continue to dominate as preferred reserve and investment currencies.

China is therefore attempting to preserve its own defensive wall of capital controls while simultaneously embedding independent international financial standards — through CIPS and the Digital Renminbi — into the global economy using advanced financial technology.

4-5. The Petrodollar and the Petroyuan

China is steadily promoting the “Petroyuan” system, under which major resource transactions such as crude oil settlements are conducted in renminbi rather than U.S. dollars. This strategy represents one of the most effective methods for undermining dollar hegemony.

The following sections examine developments in major resource-producing countries such as Russia and Saudi Arabia and their implications for international finance.

4-6. Russia: A Complete Economic Shift from the Dollar to the Renminbi

Following the invasion of Ukraine in 2022 and the imposition of Western sanctions, Russia shifted the foundation of its economy away from the U.S. dollar and euro toward the renminbi.

Renminbi Dominance in Trade Settlements

More than 90% of settlements for Russian exports of oil and natural gas to China, as well as Chinese industrial exports to Russia, are reportedly conducted in renminbi and rubles.

Renminbi Transactions on the Moscow Exchange

On the Moscow Exchange, the renminbi has surpassed the U.S. dollar as the most heavily traded foreign currency. Renminbi-denominated assets have also become central components of Russian domestic bank deposits and the National Wealth Fund (NWF).

4-7. Saudi Arabia and the Middle East: From Pro-American Alignment to Pragmatic Multipolarity

For decades, Saudi Arabia maintained the “petrodollar” system under which oil was settled exclusively in U.S. dollars in exchange for American security guarantees.

However, cracks have begun to emerge within this structure.

Introduction of Renminbi-Denominated Oil Settlements

Saudi Arabia has begun permitting and implementing renminbi-based settlements for portions of its oil exports to China, now its largest oil customer.

Full Participation in Digital Currency Infrastructure (mBridge)

The Saudi Central Bank has formally joined the mBridge initiative as a core participant. This provides Saudi Arabia with advanced infrastructure enabling direct oil settlements with China using Digital Renminbi and Digital Riyal systems without relying on U.S. banks.

4-8. Expansion Into Other Resource-Producing and Emerging Economies

The spread of the Petroyuan is no longer limited to Russia and the Middle East; it is rapidly extending into South America and Africa.

Brazil

Brazil has implemented agreements enabling direct settlements between the Brazilian real and the renminbi in trade with China, bypassing the U.S. dollar.

United Arab Emirates (UAE)

The United Arab Emirates has conducted renminbi-denominated settlements for liquefied natural gas (LNG) exports to China.

4-9. The Scenario Washington Fears Most

Professor Benjamin Cohen’s 2004 warning regarding a strategic challenge to dollar supremacy is now materializing through the rise of the Petroyuan.

The United States is particularly concerned about the following negative chain reaction:

1. Collapse of Dollar Recycling

If countries no longer need to hold dollars in order to purchase resources, central banks worldwide may begin selling U.S. Treasury bonds and reducing dollar reserves.

2. Fiscal Crisis Risk for the United States

The United States maintains enormous fiscal deficits on the assumption that the global economy will continue demanding dollars and U.S. government debt. If dollar hegemony weakens, U.S. interest rates could rise sharply, causing severe economic disruption.

China understands that it cannot surpass the dollar within a completely free financial market because of its capital controls. Consequently, it is strategically targeting sectors tied to indispensable physical resources such as oil and natural gas in order to erode the foundations of dollar dominance.

4-10. Implications for the Japanese Yen: Declining Status and Geopolitical Risk

The rise of the Petroyuan and broader de-dollarization trends are reshaping the international financial system and significantly affecting both the Japanese yen and the European euro.

China’s strategy to surround and weaken the dollar system has major implications for Japan, a long-standing U.S. ally that has benefited greatly from dollar hegemony.

Declining Status of the Yen as an International Currency

Historically, the Japanese yen served as Asia’s leading safe and stable international currency. However, China’s expansion of CIPS and the Digital Renminbi across ASEAN and the Middle East has relatively diminished the yen’s role in regional settlements.

Shifting Middle Eastern Alignment

Japan depends on Saudi Arabia, the UAE, and the broader Middle East for more than 90% of its oil imports. Under the petrodollar framework, Japan could reliably purchase oil using dollar settlements. As Middle Eastern countries strengthen economic ties with China and the renminbi, the rules governing Japan’s energy security are changing.

Complex Dynamics of Yen Depreciation and Dollar Strength

Although China, Russia, and emerging economies are attempting to reduce dollar dependence, periods of global inflation and geopolitical instability — such as tensions surrounding the Taiwan Strait or the Middle East — paradoxically increase demand for U.S. assets such as the dollar and U.S. Treasury bonds.

This has intensified foreign exchange volatility in Japan and Western markets.

4-11. The Euro: The “Second Reserve Currency” Caught Between the Dollar and the Renminbi

The euro remains the world’s second-largest reserve and settlement currency, but Europe has adopted a cautious and highly complex stance amid the U.S.–China struggle for financial supremacy.

European Concerns About U.S. Dollar Sanctions

The European Union has also become increasingly wary of the United States using SWIFT and dollar infrastructure as instruments of financial coercion.

For example, during U.S. sanctions against Iran, European countries established the INSTEX payment mechanism to allow humanitarian trade with Iran independently of the U.S. financial system.

Thus, Europe does not fully support an unchallenged U.S.-centered monetary order.

Pragmatic Cooperation with the Renminbi

For Europe, China remains an indispensable trading partner. European companies have increasingly accepted renminbi settlements for practical commercial reasons.

For example, French energy giant TotalEnergies agreed to settle LNG transactions with Chinese firms in renminbi.

Defense Through the Digital Euro

To prevent China’s Digital Renminbi from becoming a global standard, the European Central Bank (ECB) is accelerating the development of its own CBDC, the Digital Euro.

This initiative represents a strategic effort to prevent China from dominating future financial infrastructure.

4-12. Japan’s Defensive Strategy: The Digital Yen and Countering Dollar–Renminbi Competition in Asia

Japan is simultaneously supporting dollar hegemony while attempting to prevent China’s renminbi-centered financial sphere from dominating Asia.

Development of the Digital Yen

The Bank of Japan has steadily expanded pilot programs for a Digital Yen since 2023, involving major banks, regional banks, and private-sector firms.

Beyond improving domestic cashless payment systems, the broader objective is to ensure that Chinese-led digital payment infrastructure such as mBridge does not become Asia’s de facto standard.

QR Code Payment Integration with ASEAN

Japan’s Ministry of Economy, Trade and Industry is promoting interoperability between Japan’s unified QR payment standard, JPQR, and local payment systems across ASEAN countries such as Thailand, Indonesia, Malaysia, and the Philippines.

The goal is to enable direct low-cost settlements between local currencies without relying on either the dollar or the renminbi, thereby limiting Chinese influence in the retail payment sector.

Updating the Chiang Mai Initiative (CMIM)

Within the Chiang Mai Initiative Multilateralization (CMIM) framework created after the Asian Financial Crisis, Japan is strengthening yen-denominated liquidity arrangements alongside dollar-based mechanisms.

The objective is to preserve the yen as a regional financial safety net during geopolitical or financial crises without relying solely on the IMF or the renminbi.

4-13. Conclusion: The Structure of Global Finance in 2026

The global financial system is transitioning away from an era dominated by a single currency toward a multipolar structure consisting of three major blocs:

1. The Dollar Bloc

Centered on the United States, Japan, and the United Kingdom, supported by the traditional SWIFT framework and overwhelming financial market liquidity.

2. The Renminbi and Emerging-Economy Bloc

Centered on China, Russia, and BRICS Plus nations, supported by CIPS, resource-backed trade, and financial networks beyond the reach of U.S. sanctions.

3. The Euro Bloc

Focused on preserving Europe’s independent economic sphere while carefully balancing relations with both the dollar and the renminbi.

The “Monetary Regionalism” predicted by Professor Benjamin Cohen in 2004 has expanded beyond Asia into a global contest among competing economic blocs.

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Chapter 5: The BRICS Currency Initiative and the Gold Standard

5-1. The BRICS Common Currency Initiative: Moving Away from Dollar Dependence

BRICS Plus — consisting of China, Russia, Brazil, India, South Africa, and now joined by countries such as Saudi Arabia and the UAE — is seeking to establish an independent common currency or common settlement system that would be immune to U.S. financial sanctions.

• The Introduction and Practical Use of “BRICS PAY”
  Creating a completely new currency (whether physical or digital) from scratch is not easy due to economic disparities and conflicting national interests among member states, particularly the rivalry between India and China over leadership. Therefore, the immediate priority has become the construction of a shared digital settlement infrastructure and messaging system known as “BRICS PAY.”
• Utilization of Blockchain and Distributed Ledger Technology (DLT)
  BRICS is promoting the development of a blockchain-based settlement network (“BRICS Bridge”) that bypasses conventional bank accounts and the SWIFT system. Through this framework, trade among member states — such as Russian natural gas, Saudi oil, and Brazilian soybeans — could theoretically be settled instantly in local currencies without U.S. oversight or monitoring.
• Backing by Gold and Tangible Assets
  One proposed concept for the common currency is that, unlike the U.S. dollar, which is issued primarily on the basis of sovereign credit and debt expansion, the BRICS currency would derive value from a basket of tangible assets such as gold, rare metals, crude oil, and other commodities. In recent years, BRICS nations have steadily reduced holdings of U.S. Treasuries while rapidly increasing gold reserves, laying the groundwork for such a system.

5-2. Japan’s Strategic Dilemma

Japan continues to view the “unipolar U.S. dollar system” as the most advantageous arrangement for its own national interests and therefore remains firmly committed to supporting U.S. dollar hegemony.

However, as BRICS-led de-dollarization and China’s expansion of the renminbi sphere increasingly penetrate real-world economic transactions — including oil trade and supply chains — Japan has been forced to prepare secondary defensive measures in case the dollar system weakens. These measures include the development of a digital yen and strengthened coordination with ASEAN nations.

Thus, Japan’s current strategic position can be summarized as simultaneously supporting the dollar-centered order while quietly preparing safeguards for a post-dollar regional financial environment.

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Chapter 6: The Renminbi, Digital Currency, and AI Hegemony

China is aggressively promoting Central Bank Digital Currency (CBDC) as a core national strategy. The Digital Renminbi (e-CNY) is designed to bypass SWIFT and reduce vulnerability to U.S. sanctions, while also serving as a financial instrument across the Belt and Road Initiative (BRI). However, many countries remain wary of the risks associated with control by the Chinese Communist Party.

“We are witnessing the birth of Bretton Woods III, centered on commodities and strategic resources.”
— Zoltan Pozsar, Credit Suisse Report (2022)

China’s strategy surrounding the Digital Renminbi is not merely about technological convenience. Rather, it is a geopolitical weapon aimed at achieving complete independence from the U.S.-led financial order and constructing a China-centered economic sphere spanning Eurasia and Africa through the Belt and Road Initiative.

At the same time, concerns over Chinese Communist Party control — including surveillance and asset freezing — have emerged as the greatest obstacle and Achilles’ heel of this strategy.

6-1. China’s Mechanism for “Neutralizing Sanctions”

• Complete Bypass of SWIFT
  Traditional international remittances rely on SWIFT messaging systems and the U.S.-controlled CHIPS settlement network, allowing the U.S. Treasury to monitor transactions and impose sanctions or asset freezes.
• Peer-to-Peer (P2P) Cross-Border Transfers
  The Digital Renminbi enables direct data transfers through systems controlled by the People’s Bank of China or through distributed ledger technology (blockchain), without relying on U.S. financial infrastructure. As a result, even extensive U.S. sanctions could theoretically be bypassed through payment channels that are physically difficult to seize or monitor.

6-2. Integration into the Belt and Road Sphere

• Bundling with Infrastructure Investment
  China is increasingly financing infrastructure projects — including ports, railways, and logistics hubs — in Belt and Road countries using Digital Renminbi-based funding mechanisms.
• Enforced Trade Settlement Influence
  Countries heavily dependent on trade with China may receive payments for resources or agricultural exports directly in Digital Renminbi, compelling them to maintain e-CNY wallets and gradually integrating them into China’s broader economic sphere.

6-3. The “Control Risks” That Concern Other Nations Most

Even many developing countries and Belt and Road participants remain hesitant to fully embrace China’s digital financial system. Their concerns center on three primary risks:

• Information Leakage Through Complete Visibility (Surveillance)
  Although China promotes the concept of “managed anonymity,” the People’s Bank of China — and by extension the Chinese Communist Party — can theoretically monitor all transaction histories and capital movements in real time. This raises fears that sensitive corporate data or the financial activities of foreign officials could become fully visible to Beijing.
• Asset Control Through Programmable Currency
  Digital currencies can incorporate “smart contracts” that automatically enforce conditions. Technically, this could allow authorities to freeze accounts remotely, restrict spending to certain regions, impose expiration dates on funds, or disable financial access for entities deemed politically undesirable.
• Violation of Sovereignty (Digital Colonialism)
  If Digital Renminbi becomes widely circulated within another country, the influence of that country’s own legal tender and central bank could weaken significantly, potentially transferring effective monetary influence to China. (Though similar arguments are sometimes raised regarding SWIFT as well.)

6-4. The 2026 Compromise: mBridge

Because many nations remain cautious about these “control risks,” China has moderated efforts to impose the Digital Renminbi unilaterally. Instead, it increasingly promotes the multilateral framework known as “mBridge,” in which multiple central banks jointly manage cross-border CBDC infrastructure.

By presenting mBridge as a shared international platform rather than a purely Chinese system, Beijing seeks to reduce political resistance while gradually embedding its financial infrastructure into global commerce.

The dilemma facing many emerging economies can therefore be summarized as follows:

“They wish to reduce dependence on the U.S. dollar and avoid U.S. sanctions, but they also do not want to become subject to surveillance and control by the Chinese Communist Party.”

This tension may become one of the defining issues shaping the future of “Bretton Woods III.”

Former Credit Suisse strategist Zoltan Pozar’s 2022 statement became globally influential because it captured what many viewed as a historic turning point in international finance: the transition from a world dominated by “paper currency credibility” to one centered on tangible commodities and strategic resources.

6-5. What Was the Bretton Woods System?

To understand this transformation, it is necessary to examine the previous Bretton Woods systems.

• Bretton Woods I (1944–1971)
  Under this system, the U.S. dollar was fixed to gold at $35 per ounce, while other currencies were pegged to the dollar. The dollar therefore possessed backing by a tangible asset: gold.
• Bretton Woods II (1971–2022)
  Following the Nixon Shock, the convertibility of dollars into gold was suspended. Although the dollar lost direct commodity backing, it remained dominant due to America’s overwhelming military power, political credibility, and the petrodollar system, under which global demand for U.S. Treasury securities sustained dollar hegemony.

6-6. What Pozsar Means by “Bretton Woods III”

According to Pozsar, the turning point came after Russia’s 2022 invasion of Ukraine and the subsequent Western sanctions, including the freezing of Russian foreign reserves.

• Loss of Confidence in “Inside Money” (Paper Credit)
  The freezing of sovereign dollar assets demonstrated that U.S. financial assets could be weaponized. China, Russia, and many developing nations concluded that holding dollar reserves was no longer politically neutral or entirely safe.
• The Return of “Outside Money” (Tangible Assets)
  True value, according to this view, lies not in digital claims held within central bank systems, but in physical commodities such as gold, oil, natural gas, grain, and rare metals — resources essential for survival and industrial production.
• Reversal of Dollar-Centered Power
  Under “Bretton Woods III,” financial power shifts from countries that merely possess currency to countries that control and supply strategic resources.

6-7. Conclusion

The strategic movements of China and BRICS represent the practical emergence of this “Bretton Woods III” framework.

• China’s Dollar Peg and CIPS
  An attempt to secure payment routes that cannot easily be frozen by the United States.
• Petroyuan
  A system in which crude oil can be purchased directly with renminbi that may then be exchanged for Chinese industrial products or gold, bypassing the dollar.
• BRICS Commodity-Backed Currency Concepts
  A textbook example of a resource-backed monetary system envisioned under “Bretton Woods III.”

In other words, the “challenge to the dollar” foreseen by Professor Benjamin Cohen in 2004 is now evolving — precisely as Zoltan Pozsar described in 2022 — into a new international monetary system tied to strategic resources and commodities.

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Chapter 7: Countering China’s Digital Currency Surveillance and Data Hegemony

This chapter explains the “data privacy standards” and “democratic financial infrastructure strategies” advocated by Japan, the United States, and Europe (the G7). In response to China’s model of “complete state control and surveillance,” the Western democracies are attempting to establish an international standard — a de facto global norm — designed to protect individual dignity and civil liberties.

7-1. The Counter-Standards Advocated by the G7: The “G7 CBDC Principles”

The G7 nations (Japan, the United States, and Europe) have collectively adopted “13 core principles” for the development of Central Bank Digital Currencies (CBDCs), formulated largely with China’s Digital Renminbi (e-CNY) in mind. Three of the most important principles are as follows:

• Strict Protection of the Rule of Law and Privacy
  Even governments and central banks should not be able to access or track personal transaction data without judicial warrants or legitimate legal authority. Systems must therefore incorporate encryption and decentralized management mechanisms. This principle directly rejects the Chinese model, under which the state can freely monitor or freeze accounts deemed politically undesirable.
• Cyber Resilience
  CBDC infrastructure must possess strong defenses against state-sponsored cyberattacks and systemic shutdowns. This reflects concerns over cyber capabilities attributed to countries such as China and Russia, which are believed capable of disrupting foreign financial infrastructure.
• Compatibility with Free and Open Market Economies
  CBDCs should not eliminate the role of private banks or suppress market competition. In contrast to China’s centralized model of state capitalism, the G7 model seeks to preserve private-sector dynamism within the digital economy.

7-2. Europe’s Aggressive Defensive Strategy: The Fusion of the Digital Euro and GDPR

The “Digital Euro” being developed by the European Central Bank (ECB) is closely integrated with Europe’s strict data protection regime under GDPR (General Data Protection Regulation).

• Complete Anonymity in Offline Payments
  Europe is considering requiring that small offline payments — transactions conducted directly between devices without internet connectivity — provide anonymity equivalent to physical cash. Under this system, even central banks and payment providers would be unable to determine who paid whom. This is viewed as one of the strongest countermeasures against China’s “managed anonymity” model, under which authorities can effectively monitor all transactions.

7-3. Japan’s Strategy: A Financial Version of “Data Free Flow with Trust” (DFFT)

The Japanese government introduced the concept of DFFT (Data Free Flow with Trust), which has since gained support within the G7 and the OECD.

• A Financial Network Based on Trusted Partners
  The principle behind DFFT is that data should flow freely only among countries where privacy protections and national security standards can be trusted — namely democratic states governed by the rule of law.
• Providing “Trusted Infrastructure” to ASEAN
  When Japan promotes technologies such as JPQR (interoperable QR-code payment systems) and the Digital Yen in ASEAN countries, it emphasizes that these systems are safe financial networks that respect local sovereignty and prevent data extraction by foreign governments. As Asian nations grow increasingly cautious about the risks associated with China’s Belt and Road Initiative, Japan presents itself as offering “financial infrastructure that cannot be hijacked.”

7-4. The “Financial Cold War” Structure as of 2026

The world has now entered a new era — a “Financial Cold War” — defined by a clash between two fundamentally different philosophies regarding digital money.

Evaluation Axis	China Model (Digital Renminbi / Belt and Road)	Japan-U.S.-Europe Model (G7 Principles / DFFT / Digital Euro-Yen)
Core Philosophy	State control (surveillance, sanctions evasion, convenience)	Individual privacy (rule of law, freedom, decentralization)
Ownership of Data	Centrally managed by the central bank (Chinese Communist Party)	Encrypted and distributed management under strict legal oversight
Geographic Sphere	Belt and Road nations, Russia, BRICS resource states	Democratic and liberal blocs such as Japan, the U.S., Europe, and ASEAN

Emerging and developing nations face a profound dilemma:

They wish to escape the weaponization of the U.S. dollar and financial sanctions, yet they also do not want to become integrated into China’s digitally monitored financial system.

As a result, many countries are being forced to choose between competing systems — or search for a third path entirely.

Behind the struggle between state-led CBDCs (G7 vs. China), another major force has emerged: stablecoins, cryptocurrencies, and the increasingly discussed concept of a U.S. Digital Dollar.

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Chapter 8: The Latest Impact of Privately Issued Digital Currencies on International Finance

8-1. America’s Next Move: Cautious Toward a “Digital Dollar” While Weaponizing Private Stablecoins

The U.S. Federal Reserve remains highly cautious about issuing a state-controlled Digital Dollar (CBDC). One major reason is strong domestic opposition — especially among Republicans and within Congress — against the possibility that a government-issued digital currency could enable state surveillance of citizens.

Instead, the United States has increasingly begun using privately issued dollar-backed stablecoins (such as USDC and USDT) as a de facto national strategy.

• Grassroots Dollarization Across the World
  In inflation-ridden countries such as Argentina and in developing regions with weak financial infrastructure across Africa and the Middle East, ordinary citizens increasingly use dollar-denominated stablecoins via smartphones in everyday transactions. As a result, even without an official U.S. CBDC, private technology platforms are effectively expanding the global dollar economy organically.
• Creation of Powerful Buyers of U.S. Treasury Bonds
  Stablecoin issuers such as Circle and Tether purchase large quantities of U.S. Treasuries to back their reserves. Consequently, while China and Russia reduce their holdings of U.S. debt as part of de-dollarization efforts, the stablecoin industry itself has emerged as a new structural supporter of U.S. government financing.

8-2. China’s Miscalculation: Digital Renminbi vs. Stablecoins

China seeks to expand the Digital Renminbi (e-CNY) across the Belt and Road sphere, yet stablecoins have become a major obstacle to this strategy.

• Emerging Markets Prefer “Digitized Dollars,” Not Renminbi
  For businesses and individuals in developing countries, U.S. dollar-based stablecoins are often far more attractive than a Digital Renminbi subject to potential surveillance by the Chinese Communist Party. Stablecoins allow free cross-border capital movement and offer greater confidence in value stability. Even in regions near China itself — such as Southeast Asian border trade zones — settlements using dollar-denominated stablecoins are rapidly increasing, undermining China’s digital currency strategy from within.

8-3. The Role of Bitcoin: “Digital Gold” in Bretton Woods III

Within the framework of “Bretton Woods III,” as described by Zoltan Pozsar, Bitcoin (BTC) has increasingly established itself as a form of “digital gold” independent of state control.

• Demand as a Neutral Zone for Sanctions Evasion
  Countries and private actors seeking payment systems independent of both the United States (SWIFT) and China (Digital Renminbi) increasingly view Bitcoin as a neutral refuge. This includes businesses in sanctioned states such as Russia, as well as emerging countries attempting to maintain geopolitical neutrality.
• The Emergence of State Bitcoin Reserves
  In some countries and political circles, discussions are growing over whether Bitcoin should be incorporated into national foreign reserves alongside U.S. dollars and gold as a strategic reserve asset.

8-4. A New Three-Way Struggle in International Finance

Global finance is no longer a simple bipolar rivalry between the United States (the dollar) and China (the renminbi). Instead, it has evolved into a more complex three-sided competition involving the following paradigms:

1. State-Controlled Model (China Model)
   A centralized network based on the Digital Renminbi, CIPS, and the Belt and Road Initiative, emphasizing surveillance and sanctions evasion.
2. Democratic Institutional Model (G7 Model)
   Digital Euro and Digital Yen systems emphasizing the rule of law, privacy protection, and democratic governance.
3. Borderless Decentralized Model (Private/Web3 Model)
   Dollar-backed stablecoins and Bitcoin-based networks that transcend national borders through technology.

While China challenges dollar hegemony through state power, the United States counters by globalizing the convenience and liquidity of privately issued dollar-based stablecoins. At the same time, individuals seeking financial freedom increasingly turn toward cryptocurrencies.

The result is the first truly global currency war in human history — a conflict fought simultaneously through states, private technology, and decentralized digital assets.

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Chapter 9: Destabilization of the SWIFT System and Cyber Warfare

The current reserve currency system is a vast digital control structure encompassing SWIFT, submarine cables, AI, cloud computing, data centers, and cyberspace itself.

“Cyberwar is not separate from economic warfare; it is its extension.” — Martin Libicki, Cyberdeterrence and Cyberwar (RAND Corporation)

China, Russia, and North Korea are rapidly strengthening their cyber capabilities as a form of asymmetric warfare. From this perspective, the recent U.S.-China summit can be reasonably understood not merely as a discussion of trade issues, but as a comprehensive strategic negotiation encompassing the extension of the dollar-based order, the division of AI and digital currency hegemony, and the formation of a post-Iran-war order.

This highly structural analysis captures the complete fusion of geopolitics, geoeconomics, and cyberspace in contemporary international finance and global strategy.

The essence of the U.S.-China confrontation is not superficial trade issues such as tariffs or trade deficits, but rather a struggle for control over the digital operating system that governs the world.

As Martin Libicki observed, modern cyberwarfare is an extension of economic warfare. It is conducted daily through peacetime control of infrastructure rather than open military conflict. From this perspective, the following three strategic negotiation axes can be analyzed.

9-1. Extending the Dollar Hegemony Through Defense of Cyber and Physical Infrastructure

The current dominance of the U.S. dollar is protected not merely by “trust,” but by an invisible global defense network composed of both physical and digital infrastructure.

• Control of Submarine Cables and Data Centers
  More than 95% of global international communications—including SWIFT data—travel through submarine cables. The United States and its allies maintain dominance by controlling cable routes, landing stations, and the cloud data centers (AWS, Microsoft, etc.) that process the data, thereby possessing both the power to intercept/surveil communications and the authority to shut them down.
• Asymmetric Cyberwarfare by China, Russia, and North Korea
  Unable to match U.S. military and economic power directly, China, Russia, and North Korea (including groups such as Lazarus) have drastically intensified cyberattacks targeting financial institutions, cryptocurrency exchanges, payment networks such as CIPS, and critical infrastructure as an asymmetric warfare strategy.
• Infrastructure Negotiations Behind the Summit
  The strong U.S. demand during U.S.-China summit meetings for the cessation of cyberattacks and restrictions on hacking critical infrastructure reflects an absolute defensive objective: protecting the digital and physical networks underpinning the dollar system from hybrid threats posed by China, Russia, and North Korea, thereby prolonging dollar dominance in cyberspace.

9-2. Division of AI and Digital Currency Hegemony and International Governance

Both the United States and China coldly recognize that neither side can become the absolute winner in AI and digital currencies (CBDCs/stablecoins), since each has already built enormous independent economic spheres.

• Weaponization of Finance Through AI
  AI is being used to automate cyberattacks and conduct ultra-fast pattern analysis of international capital flows, including sanctions evasion detection. Whoever controls AI technological supremacy will determine the effectiveness and granularity of financial sanctions.
• Rule-Making to Avoid Catastrophic Conflict
  A hidden agenda of summit diplomacy is the establishment of “guardrails” for military and financial uses of AI. To prevent catastrophic cyber-financial panic, negotiations likely include mutual recognition and division of spheres of influence between China’s “digital yuan/CIPS bloc” and the U.S.-led “digital dollar/stablecoin/SWIFT bloc,” ensuring that neither side destroys the other’s system through cyberwarfare.

9-3. Formation of the Post-Iran War Order: The Frontline of Bretton Woods III

Applying Zoltan Pozsar’s concept of “Bretton Woods III”—the era of commodities and resource-backed systems—the formation of a postwar order in the Middle East surrounding Iran represents the principal battlefield for control of energy settlement systems.

• Preventing the Entrenchment of the Petro-Yuan
  Iran has fully embraced yuan-based settlement for oil exports to China. The United States seeks to prevent the broader Middle East order—including Saudi Arabia and the UAE—from further shifting toward China’s CIPS and yuan settlement system.
• Strategic Bargaining Between the U.S. and China
  Discussions on Middle Eastern affairs during U.S.-China summits are not primarily humanitarian in nature; they are strategic negotiations over maintaining balance within oil supply chains and settlement currencies. The United States likely pressures China to restrain excessive financial and military support for Iran, while offering concessions in specific trade sectors and limited acceptance of parts of China’s digital economic sphere as part of a broader grand strategy negotiation.

9-4. The Era of Digital Imperialism

What Professor Benjamin Cohen warned about in 2004 as “currency regionalism” has, by 2026, evolved into a struggle for digital imperial dominance encompassing cyberspace, submarine cables, AI, cloud systems, and data centers.

Trade disputes are merely the visible tip of a massive iceberg. The true nature of U.S.-China summit diplomacy is a cold negotiation over profit-sharing and rule-making designed to prevent mutual destruction through full-scale cyber-financial warfare rather than nuclear war.

The following sections explain Japan’s concrete role in cyber-financial defense and the countermeasures private companies must adopt.

9-5. Japan’s Strategic Role (Quad and U.S.-Japan Alliance)

As a critical hub for submarine cables and a member of the G7, Japan is rapidly strengthening the following three functions as a key defender of the Western democratic sphere.

• Legislation and Implementation of Active Cyber Defense
  To protect critical infrastructure—finance, telecommunications, and electricity—from cyberattacks by China, Russia, and North Korea, Japan is advancing “active cyber defense.” This includes granting the Self-Defense Forces and other authorities the ability to preemptively intervene against hostile servers upon detection of attack indicators, while establishing real-time coordination with U.S. Cyber Command.
• Leadership in Submarine Cable Defense Within the Quad
  Japan, through firms such as NEC, possesses world-leading submarine cable deployment technology. Through the Quad framework (Japan-U.S.-Australia-India), Japan seeks to lead efforts to maintain “clean” communications and financial infrastructure in the Indo-Pacific by excluding Chinese-made cables and relay equipment suspected of containing surveillance backdoors.
• Preventing ASEAN Financial Decoupling Through the Digital Yen
  Japan provides ASEAN countries with secure financial infrastructure as the economic counterpart of the U.S.-Japan alliance. Through technological cooperation and interoperability projects such as JPQR, Japan offers Asian nations a neutral defensive alternative to prevent complete absorption into China and Russia’s surveillance-oriented financial networks.

9-6. Supply Chain and Financial Cyber Risks Facing Private Companies

Asymmetric cyberwarfare by China, Russia, and North Korea increasingly targets private companies—especially those within critical infrastructure supply chains. Essential measures companies must adopt as of 2026 include the following.

• Comprehensive Supply Chain Audits Based on Zero Trust
  Companies are abandoning the traditional assumption that internal networks are inherently safe. Instead, they are implementing “zero trust” systems that verify all communications from domestic and overseas offices, subsidiaries, and partners. Numerous cases have emerged in which local subsidiaries or overseas suppliers become compromised as backdoors into headquarters and core financial settlement systems.
• AI-Based Fraud Detection and Mandatory Multi-Factor Authentication
  Sophisticated AI-driven business email compromise (BEC) scams and deepfake voice fraud impersonating executives are rapidly increasing. Financial and treasury operations now prohibit relying solely on email or voice instructions, instead requiring multiple independent verification routes such as physical tokens, biometric authentication, and multi-person approval systems.
• Incident Drills for Ransomware and Geopolitical Crises
  Companies regularly conduct BCP simulations assuming ransomware encryption or geopolitical crises such as Taiwan Strait or Middle East conflicts that sever communications with overseas sites. These exercises aim to ensure manual or closed-environment continuation of payments and shipments within 24 hours.
• Compliance with Data Protection Regulations and Isolation of China Operations
  China’s Data Security Law and Anti-Espionage Law create risks requiring all domestic data to be provided to Chinese authorities upon request. Companies therefore need to logically isolate Chinese servers and networks from headquarters systems to prevent leakage of global financial and customer data.

9-7. Toward Integrated Geoeconomic Security Between Government and Industry

As Benjamin Cohen, Zoltan Pozsar, and Martin Libicki each argue, today’s world is a battlefield where currency systems, resources, cyberspace, and AI are fully interconnected.

Only through cooperation between governments protecting infrastructure frameworks through international alliances such as the Quad and private companies strengthening internal cybersecurity can resilient defensive lines against Chinese and Russian digital-financial dominance effectively function.

The following sections explain specific risk cases in financial institutions and manufacturing industries, and how national-level strategies—dollar hegemony, Bretton Woods III, and asymmetric cyberwarfare—translate into practical corporate defense measures.

9-7-1. Risk Cases and Countermeasures in Financial Institutions

Financial institutions represent the outermost layer of the SWIFT-based dollar system and are prime targets for hacker groups and hacktivists linked to China, Russia, and North Korea.

• Geopolitical DDoS Attacks Disrupting Payment Systems
  According to Check Point Research, DDoS attacks against the financial sector have surged alongside geopolitical tensions such as those involving Ukraine and the Middle East. The goal is not financial theft, but rather disrupting banking portals and payment interfaces to undermine confidence in Western infrastructure.

Countermeasure:
Deploy cloud-based DDoS mitigation services and build automated defensive resilience systems capable of blocking malicious cross-border traffic at the network edge.

• Exploitation of Open Banking API Vulnerabilities
  Attackers exploit weaknesses in APIs linking bank accounts with fintech and third-party services, using fake authentication credentials to infiltrate securities and deposit accounts for fraudulent transfers and account takeovers.

Countermeasure:
Enforce mandatory multi-factor authentication (MFA) in compliance with Japan’s Financial Services Agency cybersecurity guidelines and conduct security audits of all external API-connected firms.

9-7-2. Risk Cases and Countermeasures in Manufacturing

Manufacturing lies at the core of Bretton Woods III because it directly involves physical resources and supply chains. Disruption of factory operations can therefore severely impact national economies.

• Ransomware Attacks on OT Systems
  Weak links within supply chains—such as subcontractors or external maintenance devices—are increasingly used to infiltrate and encrypt operational technology (OT) systems controlling factory production lines, causing complete shutdowns and losses amounting to hundreds of millions of yen.

Countermeasure:
Completely separate IT networks from OT factory systems through segmentation to prevent malware propagation.

• Compliance Risks Under the EU Cyber Resilience Act (Effective September 2026)
  Under the EU Cyber Resilience Act, manufacturers of IoT devices and industrial machinery must report vulnerabilities within 24 hours. Japanese firms failing to comply face legal risks including sales bans and severe fines within the EU market.

Countermeasure:
Rapidly establish Software Bill of Materials (SBOM) management systems capable of identifying software vulnerabilities in real time.

9-8. Important Supplement: Impact of Japan’s 2026 Legal Reforms on the Private Sector

Japan’s emerging “active cyber defense” framework is no longer a voluntary effort for private companies but increasingly a legal obligation.

• Enforcement of the Cyber Response Capability Enhancement Act (October 2026)
  Under this law, operators of critical infrastructure—finance, telecommunications, electricity, etc.—must report system assets and cyber incidents to the government, enabling authorities to conduct countermeasures including neutralization of hostile servers.
• Launch of the Security Clearance System
  Employees handling sensitive economic security information will undergo government background checks. Companies unable to secure cleared personnel risk exclusion from major government, defense, and infrastructure projects.

9-9. Summary

1. At the State Level
   The United States and China are engaged in invisible cyber-economic warfare involving submarine cables, AI, and digital currencies (CIPS/stablecoins), while simultaneously negotiating rules and spheres of influence through summit diplomacy.
2. The Japanese Government
   In alliance with the United States, Japan is shifting from passive to active cyber defense ahead of the October 2026 enforcement of the Cyber Response Capability Enhancement Act.
3. Private Companies
   As the front line of this defense structure, financial institutions must protect payment data (SWIFT), while manufacturers must secure resources and OT supply chains. These have become indispensable management priorities as of 2026.

9-10. Three Concrete Preparation Steps Companies Must Begin Immediately

The paradigm shift of Bretton Woods III is now directly linked to everyday network management and cybersecurity investments.

To adapt to Japan’s new national defense frameworks—including the 2026 Cyber Response Capability Enhancement Act and the Security Clearance system—private companies should immediately undertake the following three preparation steps.

Step 1: Inventory and Segmentation of Critical Assets and Information

• Identify all payment systems (SWIFT links, banking APIs) and OT factory control networks.
• Determine which data constitutes sensitive economic security information.
• Logically and physically isolate critical systems from ordinary corporate networks through micro-segmentation.

Step 2: Build Audit and Government Coordination Systems

• Upgrade SIEM and EDR systems capable of storing tamper-proof logs for several months.
• Create incident response structures enabling reporting to management and government authorities within 24 hours.

Step 3: Prepare Security Clearance Personnel Systems

• Identify core personnel involved in defense, critical communications, advanced AI, and infrastructure projects.
• Establish HR procedures and consent frameworks for background checks while protecting employee privacy and human rights.

9-11. The Required Mindset Shift for Private Companies

Corporate cybersecurity is no longer merely a cost of protecting internal systems. It has become a passport for remaining within the financial and digital defense supply chains of allied democratic nations.

Companies that fail to prepare risk not only cyberattacks, but also exclusion from markets as “untrusted suppliers” due to evolving laws and procurement standards.

9-12. From the 2005 Yuan Reform to the Cyber-Financial Total War of 2026 (Bretton Woods III)

9-12-1. Structural Evolution: From History to the Present

• 2005 (Historical Starting Point)
  China announced a transition to a currency basket system. In practice, however, it maintained a de facto dollar peg through market intervention to preserve export competitiveness and prevent capital flight.
• 2022–Present (Arrival of Bretton Woods III)
  Western sanctions against Russia—including SWIFT exclusion and reserve asset freezes—accelerated the global shift from paper-credit systems to commodity-centered systems. China has responded by expanding CIPS and the petro-yuan alongside resource nations such as Russia and Saudi Arabia.

9-12-2. The Main Battlefield in 2026

Modern dollar hegemony is sustained through a vast digital and physical infrastructure encompassing SWIFT, submarine cables, AI, cloud computing, and data centers.

• Intensification of asymmetric cyberwarfare by China, Russia, and North Korea.
• U.S.-China summit diplomacy as strategic negotiations to prevent catastrophic clashes between competing financial-digital operating systems.

9-12-3. Japan’s Defensive Measures

• Digital yen experiments and JPQR interoperability projects aimed at preventing Asia from being absorbed into China’s surveillance-oriented financial system.
• Active cyber defense and security clearance systems institutionalized through 2026 legal reforms.

9-12-4. Essential Actions Required of Private Companies

To remain within the G7-led economic security and DFFT supply chain framework, companies must immediately implement:

Step 1: Asset Classification and Isolation

• List financial settlement systems and OT networks.
• Isolate critical systems from ordinary networks.

Step 2: Government Coordination and Logging

• Deploy EDR and preserve cyberattack logs.
• Build incident reporting systems capable of notifying authorities within 24 hours.

Step 3: Personnel Clearance Preparation

• Identify core personnel involved in classified government projects.
• Institutionalize consent procedures for background checks.

9-13. Conclusion

As of 2026, cybersecurity has evolved beyond a mere IT expense into a passport for survival within national security and financial settlement systems.

Understanding the cyber-financial defense structures being constructed at the state level and protecting infrastructure and data at the private-sector level will become the ultimate form of corporate defense in the coming era.

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Chapter 10: Japan’s Strategic Challenges

Japan continues to hold massive amounts of U.S. Treasury securities and maintains the Japan–U.S. alliance as the cornerstone of its national security. However, if the world transitions toward a gold-linked digital currency system, a multipolar monetary order, and non-dollar settlement frameworks, the credibility foundation of the Japanese yen itself will inevitably require redefinition.

After World War II, both Japan and Germany achieved economic development under the U.S.-centered financial order. Going forward, however, a comprehensive national strategy encompassing energy security, AI, semiconductors, cyber defense, gold reserves, and digital finance will become indispensable.

The two pillars of Japan’s postwar economic security structure — the Japan–U.S. alliance and absolute dependence on the U.S. dollar through massive holdings of U.S. Treasuries — are now being forced into structural redefinition by the arrival of what Zoltan Pozsar calls “Bretton Woods III,” an era centered on real assets and commodities.

To preserve the credibility foundation of the yen and survive in the next-generation multipolar world, Japan’s comprehensive national strategy must focus on the following five areas.

10-1 Redefining the Monetary and Credit Foundation (Gold Reserves and Digital Finance)

Strategic Expansion of Gold Reserves

Japan possesses one of the world’s largest foreign exchange reserves, but the overwhelming majority consists of U.S. Treasury assets (dollar-denominated), while gold holdings account for only a few percent.

If the global monetary system shifts toward a gold- and commodity-linked framework, Japan will need a pragmatic balancing strategy by gradually converting part of its U.S. Treasury holdings into gold (“gold shift”) and diversifying the backing assets of the yen.

A Hybrid Economic Sphere of Digital Yen and Stablecoins

By integrating the “digital yen (CBDC)” promoted by the Bank of Japan with yen-denominated stablecoins issued by private banks and corporations, Japan can realize ultra-fast and near-zero-cost settlements.

This would establish a “digital financial defense sphere” capable of sustaining domestic economic activity and transactions among trusted allies even if the dollar settlement network (SWIFT) becomes paralyzed or decoupled.

10-2 Reducing Dollar Dependence in Energy and Supply Chains

Development of Yen-Denominated Resource Settlements

Japan imports nearly all of its energy through dollar-based settlements, leaving it highly vulnerable to yen depreciation and dollar liquidity crises (“dollar shortages”).

Japan will therefore be compelled to expand resource procurement frameworks denominated in yen, or based on direct currency swaps with allied countries such as Australia and selected resource-producing nations in Southeast Asia and the Middle East. Such measures would help cushion the impact of a potential collapse of the petrodollar system.

10-3 Securing Sovereignty in AI and Semiconductors (Digital Self-Sufficiency)

Domestic Production of Next-Generation Semiconductors (Rapidus, etc.)

At the foundation of the digital power structure — AI, cloud computing, and data centers — lies semiconductor technology.

Japan must quickly stabilize domestic advanced semiconductor production bases such as Rapidus in Hokkaido and TSMC facilities in Kumamoto, thereby securing technological choke points that can be leveraged on equal footing with the United States and Europe.

Domestic Generative AI and Decentralized Data Centers

Relying entirely on the cloud services and AI infrastructure of American Big Tech firms (GAFAM) effectively reduces Japan to a “digital tenant farmer.”

In the fields of national security and finance, it is essential for Japan to develop secure domestic AI systems and establish self-sufficient data center infrastructure powered by stable domestic energy sources, including nuclear restarts and next-generation renewable energy. These facilities should be geographically dispersed throughout Japan and surrounding offshore areas.

10-4 Cyber Defense and the Evolution Toward an Autonomous Japan–U.S. Alliance

Transition to an Equal “Intelligence and Cyber Alliance”

Traditionally, the Japan–U.S. alliance has been characterized as “the U.S. spear and Japan’s shield.”

However, with the enforcement of Japan’s “Cyber Response Capability Enhancement Act” in October 2026, Japan must establish independent active cyber defense capabilities and evolve into an equal cyber-security partner capable of making the United States recognize that “without Japan, the defense line protecting Asia’s submarine cables and financial data would collapse.”

10-5 Conclusion: The “New Shared Fate” of Japan and Germany

After World War II, both Japan and Germany achieved miraculous reconstruction under Pax Americana and the protection of the U.S. financial and military umbrella. Today, however, both countries face the same structural challenge.

Germany has already been forced to abandon dependence on cheap Russian resources and the Chinese market and is struggling to rebuild its own economic operating system.

To avoid repeating Germany’s difficulties, Japan must abandon the complacent assumption that “holding U.S. Treasuries guarantees safety.” Instead, it must implement a state-led “Comprehensive Geo-Economic Strategy” combining three pillars:

• Currency (digital yen and gold)
• Technology (semiconductors and AI)
• Physical infrastructure (submarine cables and defense capabilities)

While respecting traditional alliances, Japan must quietly and steadily build an independent survival strategy (“Plan B”). Such efforts could become the new credibility foundation of both the Japanese yen and the Japanese state in the emerging multipolar era.

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Chapter 11: The End of the Postwar Financial Order, Gold Reserves, and Japan

After World War II, the United States became the world’s largest holder of gold reserves. Defeated nations such as Japan and Germany, pursuing postwar reconstruction, were incorporated into a U.S.-dependent financial order for reasons of security and monetary stability.

One particularly symbolic example was Germany’s gold repatriation issue. In 2013, the German Bundesbank initiated a phased program to repatriate large portions of its gold reserves held in the United States and France.

Economist Barry Eichengreen observed:

“Even in a fiat currency world, gold retains symbolic and strategic importance.”
— Barry Eichengreen, Globalizing Capital (Princeton University Press)

Even in the digital currency era, gold has not disappeared as the ultimate reserve asset. On the contrary, the more AI, CBDCs, blockchain systems, and cyber-finance develop, the more important gold becomes as a backing asset.

This historical reality perfectly demonstrates that the emergence of “Bretton Woods III” — the age of real assets and commodities — did not arise suddenly, but rather represents an extension of the deep-rooted distrust held by central banks toward the fictional nature of reserve currency credibility.

As Professor Barry Eichengreen noted, even in a world dominated by fiat currencies that exist merely as accounting figures, gold has not lost its symbolic and strategic significance.

Indeed, a powerful paradox is at work: the more invisible digital systems such as AI and cyber-finance expand, the more humanity gravitates back toward gold as the one physical asset that cannot be altered, erased, or digitally manipulated.

The following sections analyze the historical lessons of Germany’s gold repatriation and the true role of gold in the digital currency era.

11-1 Geopolitical Lessons from Germany’s Gold Repatriation

Germany’s repatriation of gold reserves from the Federal Reserve Bank of New York and the Banque de France — approximately 674 tons completed by 2017, three years ahead of schedule — was the first alarm bell of modern de-dollarization.

Escape from Cold War-Era Structures

Germany originally stored gold abroad to prevent Soviet seizure in the event of a Cold War invasion of West Germany, reflecting dependence on U.S. security guarantees.

Distrust of “Paper Credit” and Return to Physical Assets

Following the 2008 Lehman Shock and the European sovereign debt crisis, public concern grew within Germany regarding whether the United States truly possessed Germany’s gold reserves and whether physical assets located abroad could actually be reclaimed during a systemic crisis.

Recovery of Sovereignty

Through repatriation, Germany returned to the harsh reality that what ultimately supports a nation during international financial crises is not trust in allies, but physical gold stored within its own vaults.

11-2 Why Gold Becomes More Important in the Digital and AI Era

In a world where blockchain, CBDCs, quantum computing, and AI are highly advanced, gold functions not merely as an old metal, but as the ultimate cyber-defense asset.

Elimination of Counterparty Risk

The greatest weakness shared by digital yuan systems, future digital dollars and euros, stablecoins, and cryptocurrencies is that their value effectively becomes inaccessible if infrastructure — electricity, communications, servers, and systems — is disabled through sanctions or cyberattacks.

Gold is the only standalone asset immune to hacking, electronic deletion, or remote freezing by states.

The Antithesis to Infinite AI Replication and Forgery

As AI automatically generates code and deepfakes undermine all forms of trust, gold possesses a physical constraint: neither humans nor AI can artificially create or mass-produce it from nothing.

This absolute scarcity may become the strongest defense against the inflation of computational power.

Integration as the Anchor of Digital Currency

The ultimate method for BRICS common currency initiatives and stablecoins to gain credibility is through audited gold reserves backing issued tokens — a “digital gold standard.”

Gold thus serves as the stabilizing anchor needed to make society trust intangible digital assets.

11-3 Japan’s Comprehensive Strategy of Gold and Digital Finance

At the intersection of history and technology, Japan’s strategic direction is becoming increasingly clear.

Reconstruction of the Defense Line Through Central Bank Gold Coordination

Like Germany, Japan must redefine gold reserves as an element of physical sovereignty. Rather than simply holding U.S. Treasuries, Japan should strategically increase the share of gold reserves to ensure liquidity during crises.

The Option of a Gold-Backed Digital Yen

If the Bank of Japan expands the digital yen or leads financial cooperation within Asia, Japan could counter the resource-backed monetary systems envisioned under “Bretton Woods III” by backing its digital currency with gold reserves and high-quality foreign assets.

This would allow Japan to establish the reputation of issuing the world’s cleanest and most materially backed digital currency.

11-4 History Repeats Itself in Spirals

The postwar financial system that began with the Bretton Woods framework of 1944 (gold-dollar standard) is now, in 2026, returning to physical foundations — gold and real assets — through the advanced technologies of AI and blockchain.

Germany’s decision beginning in 2013 has proven prescient.

Japan, while maintaining its strong alliance with the United States in digital and military domains, must also shift toward a strategy of securing physical assets — gold, semiconductors, and energy — within its own territory as the ultimate anchor of national credibility.

The following sections explain Japan’s gold reserves and the critical security implications of repatriation from the United States.

11-5 Japan’s Gold Reserves and Custody in the United States

Japan’s official gold reserves amount to approximately 846 tons (worth roughly USD 125 billion, or ¥19–20 trillion at market prices).

The Ministry of Finance and the Bank of Japan do not officially disclose the detailed storage allocation of these reserves for security reasons. However, historical practices under the Bretton Woods system strongly suggest that the majority remains deposited in the underground vaults of the Federal Reserve Bank of New York.

Only a small portion is believed to be stored domestically.

11-6 Three Critical Reasons Why Repatriation Matters

Germany’s repatriation movement after 2013 was not merely an asset transfer but a recovery of sovereignty. A similar move by Japan would carry major significance.

Elimination of Counterparty Risk and Physical Auditing

Storing gold in the United States inherently means trusting that the U.S. government would return it during crises.

Germany’s repatriation was driven largely by public demands to verify whether the gold physically existed in New York.

Protection Against Asset Freezes and Seizures

The 2022 sanctions against Russia demonstrated that the United States can freeze or seize dollar assets and central bank reserves.

If Japan someday pursues national interests diverging from U.S. strategy, gold stored in America could become a powerful form of economic hostage leverage.

Establishing Independent Credibility in a Multipolar Digital Era

In a future commodity-driven “Bretton Woods III” environment, gold stored in another country’s vaults will possess weaker credibility as a reserve asset.

Only physical gold securely located within Japan can provide an independent credibility foundation for Japanese sovereign bonds and a future digital yen.

11-7 Why Japan Cannot Demand Repatriation (Historical Trauma)

Japan’s reluctance to demand gold repatriation or refuse large-scale dollar accumulation stems from historical trauma in U.S.–Japan relations.

In the late 1970s, Japanese Ministry of Finance officials reportedly considered increasing gold purchases due to concerns over dollar inflation and depreciation. According to accounts from the time, senior U.S. Treasury officials strongly pressured Japan to abandon the idea.

Since then, selling U.S. Treasuries or requesting large-scale gold repatriation has effectively become a geopolitical taboo within the framework of the Japan–U.S. alliance.

11-8 Conclusion: Japan’s “Plan B”

Germany reclaimed its gold reserves despite the political risks of challenging the United States.

Japan, however, currently holds over USD 1.2 trillion in U.S. Treasuries and plays a major role in supporting the dollar system. Abruptly demanding full gold repatriation would therefore be unrealistic and politically destabilizing.

Nevertheless, to prepare for a multipolar future, Japan should quietly advance the following phased defensive measures:

1. Store newly acquired gold domestically rather than in the United States.
2. Develop digital gold-backed payment infrastructure and stablecoin systems supported by physical gold reserves located within Japan.

The location and potential repatriation of Japan’s 846 tons of gold may ultimately determine whether Japan remains a subordinate participant in Pax Americana or emerges as a sovereign state capable of surviving in the era of Bretton Woods III.

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Conclusion

What the current Iran conflict has made increasingly clear is that the petrodollar system was never merely an oil settlement mechanism; it represented the integration of military power, finance, energy, information, and digital technology into the structure of American hegemony itself.

However, the Iran conflict, the limits of sanctions against Russia, BRICS expansion, the AI-driven financial revolution, digital currencies, and cyber warfare are now pushing that structure toward a historic turning point.

The core of ongoing U.S.–China negotiations is therefore not simply about trade disputes. Rather, it is a struggle over who will control the next global reserve currency system — arguably the greatest hegemonic negotiation of the 21st century.

The Russia–Ukraine war and the U.S.–Iran confrontation must also be understood as conflicts connected to resistance against the dollar-centered reserve currency order and efforts to establish independence from the U.S. dollar system.

Countries around the world are preparing for the transition toward digital currencies. Yet the central challenge remains how to establish trust and credibility in those systems.

Ultimately, whichever actor succeeds in securing global confidence in its digital currency framework may be able to achieve independence from the existing dollar-centered reserve currency order.

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References

1. David E. Spiro, The Hidden Hand of American Hegemony, Cornell University Press, 1999.
2. Paul Kennedy, The Rise and Fall of the Great Powers, Random House, 1987.
3. Nicholas Mulder, The Economic Weapon, Yale University Press, 2022.
4. Martin Libicki, Cyberdeterrence and Cyberwar, RAND Corporation.
5. Zoltan Pozsar, Bretton Woods III, Credit Suisse Report, 2022.
6. Jacques Sapir, Russian Economic Resilience, 2023.
7. Barry Eichengreen, Globalizing Capital, Princeton University Press.
8. Joseph E. Stiglitz, Globalization and Its Discontents, W.W. Norton, 2002.
9. Benjamin J. Cohen, The Future of Money, Princeton University Press, 2004.
10. Michael Hudson, Super Imperialism, Pluto Press.
11. Susan Strange, States and Markets, Continuum International Publishing.
12. Benn Steil, The Battle of Bretton Woods, Princeton University Press.
13. Bundesbank Official Reports on Gold Repatriation, 2013–2017.
14. CNBC / Bloomberg, Trump CEO China delegation reports, May 11–13, 2026.
15. Wikipedia / Britannica / House of Commons Library, 2026 Iran War, various dates.
16. Japan Institute of Crisis Management, various reports on cyber security and national strategy.

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・Author: Akinobu Kinoshita (Director, Institute of Middle East Asia Information Strategy)

An independent analyst specializing in political affairs, security, and information strategy across the Middle East and Asia. Drawing on over 30 years of field networks and hands-on experience at the government level, he founded the Middle East Asia Information Strategy Institute in 2025. Author of ISIS to Tatakau (Aiikusha, 2016).