Brunello Rosa
Visiting Professor, Course Coordinator
The tumultuous events unfolding in the US have dominated global headlines since late 2024 when the Trump administration won a historic second term. Amid the maelstrom of news, world events and seismic geopolitical tremors radiating from Washington, another story may have slipped beneath the radar.
Back in October, the Bank for International Settlements quietly announced it was leaving Project mBridge, a novel blockchain-based payments ledger designed to facilitate cross-border capital flows using Central Bank Digital Currencies or CBDCs—government-backed cryptocurrencies that are yoked to fiat currency and issued by central banks. Touted as a faster, safer and more cost-efficient alternative to SWIFT and other international payment systems, mBridge was launched in 2021 with backing from a slew of Middle Eastern and Asian Central Banks—principally China, who also developed the platform’s undergirding technology. Stepping back from the project, BIS chief Augustin Carstens said it had reached minimum viable product stage and was at a point of maturity where “the partners can carry it on by themselves.”
The BIS decision to “graduate out” of mBridge has raised a few eyebrows in the global banking community, not least because of suspicions that the platform could be leveraged by BRIC countries – Russia in particular – to pursue cross-boundary transactions using CBDCs, thereby evading sanctions imposed by the West. Then there’s the question of China. While mBridge promises to democratise international trade, in as much as it gives member countries greater control over their financial transactions, it is also seen by many as a function of Chinese efforts to bolster the prevalence and influence of the e-yuan as a viable alternative to the dollar. With the BIS no longer at the helm, there are concerns that the way is now clear for China to develop its own global, yuan-based digital channel as it sees fit, unfettered by international scrutiny of its partnerships, transactions or technology.
These are legitimate concerns, says Visiting Professor Brunello Rosa, who teaches and coordinates the LSE’s Global Macroeconomic Challenges programme. Because mBridge is just the latest chapter in China’s quest to internationalise the yuan, drive the wholesale digitisation of international finance and lead the global charge in de-dollarisation.
De-dollarising the world
Since World War II, the US dollar has been the cornerstone of the global financial system. Its status as the world’s primary reserve currency has given the US unchallenged dominance over the global financial infrastructure, with SWIFT and other networks and platforms facilitating cross-border trade and payments primarily in dollars. Simply put, America has been the world’s foremost economic power for almost 100 years. But all of that is about to change, warns Rosa.
The rise of CBDCs, spearheaded by China, is poised to transform the axes of economic power in our world, giving developing countries –BRICS and the so-called Global South—an opportunity to leapfrog their affluent competitors in the west, and heralding the onset of what he calls a “new Cold War;” one predicated on digital currencies in which the e-yuan is the predominant power. All of this is set to happen at the “speed of light,” says Rosa. And if the West is to have any agency whatsoever in the new world order, it will need to act now to develop its own digital currencies—currencies that mirror the values and ethos of its own liberal democracies.
"China is already 10 years ahead of the US and Europe. President Xi Jinping’s Belt and Road Initiative, launched in 2013, built strategic infrastructure across Asia, the Middle East, and Africa. Since then, China’s strategy has been relentless—first with the Digital Silk Road, investing in optical cables and satellites, then with the 2022 launch of the digital renminbi, the world’s first CBDC."
China has been pioneering in its understanding of the promise of this new type of money in transforming the costs and time attached to cross-border transactions, says Rosa. But more importantly, Beijing has understood the strategic importance of creating – and owning—the technological infrastructure, or “rails” on which these digital transactions can be performed.
"Once you own the infrastructure, when you control the rails, you also control the trains; you become the gatekeeper. China is the technological brainpower behind CBDCs, owning the rails that support transactions using this new money. That puts China in an incredibly powerful position vis a vis the emerging global financial system, with massive implications for Western economies—and their democracies."
The rise of China
China could well be poised to control global payment systems, says Rosa; meaning that China could now also be poised to become the world’s dominant macro-economic force. And that’s problematic for liberal democracies that are predicated on entrepreneurship, capitalism, private and public enterprise ownership, and essential economic freedoms, he stresses.
"China is not a democracy, and we have seen foremost entrepreneurs lose everything overnight. So the question for Western economies becomes acute: do we accept an autocratic regime shaping global trade, or do we act now to build our own digital financial infrastructure and remain competitive?"
All of this, of course, is complicated by current geopolitical tumult and uncertainty. The America First rhetoric coming out of Washington is driving seismic shifts that risk splintering historic political, social, cultural and economic allegiances. With the West at unprecedented risk of fracture and disintegration, says Rosa, the road ahead for liberal democracies looks “bumpy at best.”
"It’s tempting to see this as dystopian. The US says its allies have been freeriding, but weakening Western alliances only strengthens its competitors. Both China and the US have put Europe on notice that it will need to take real action on economic and political unification to build enough critical mass to fight this battle."
Knowledge is power
While the immediate outlook feels grim, Rosa is adamant understanding the nature of the challenges ahead is a critical first step towards devising solutions to them. Seeing the current picture with clarity and mastering the “macroeconomic fundamentals” to make sense of it, are “strong building blocks” that will help decision makers manage the volatility and uncertainty.
Rosa teaches the LSE Global Macroeconomic Challenges programme that kicks off this spring on campus. The programme, he says, is an essential grounding in the “big picture” in front of business leaders, as well as the instruments and mechanisms available to them to piece together a viable path forward; “truths that hold,” he says, that will help illuminate answers.
"This programme helps participants cut through the complexity and focus on macroeconomic fundamentals—monetary and fiscal policies, financial systems, and the risks and opportunities of digital assets. Leaders need these insights to navigate an uncertain global landscape."
The programme doesn’t offer answers, he stresses, but rather pathways towards answers that can, and will evolve over time, and in response to change.
"Macroeconomics is never static—everything has consequences. Globalisation lifted 800 million in China out of poverty but at a cost to blue-collar workers in places like Ohio. Now, a global redistribution of income and power is underway. For macroeconomists, the task is clear: understand, describe, and share—because forewarned is forearmed, and knowledge is power."
Purchase your copy of Brunello Rosa’s book Smart Money: How Digital Currencies Will Shape the New World Order
https://www.amazon.com/Smart-Money-Digital-Currencies-Shape/dp/1526675870
Brunello Rosa
Visiting Professor, Course Coordinator
Brunello Rosa is the coordinator of the LSE Executive Education course "Global Macroeconomic Challenges." He is a macroeconomist and strategist with extensive policy experience, who works in the private sector and academia and advises market participants, policy makers and institutions. He is Visiting Professor at City, University of London, an Associate at the Centre For Macroeconomics of LSE, and Senior Executive Fellow at Bocconi University's Business School in Milan. He is also the CEO and Head of Research at Rosa & Roubini Associate, an independent macro-financial and geo-political advisory, which in 2022 and 2023 has been recognised as the best independent macroeconomic research & advisory firm by Corporate Vision Magazine. Brunello is an advisor to the UK Parliament’s All-Party Parliamentary Group on Central Banks and Digital Currencies, to the Chief Economist of the European Investment Bank and to the Ambassador of Italy to the UK. Brunello Rosa attends the meetings of the Academic Advisory Group recently formed by the Bank of England and HM Treasury, on matters related to his line of research on CBDCs. In 2021, Brunello was recognized as Top 20 Dynamic CEOs in the UK by the magazine CEO Publication, with a profile article titled "The Pioneering Visionary;" in 2020, he was included in the list of the top-100 financial-services influencers in the world by Onalytica for his discussion over Covid-19 and its impact on the global economy and financial markets.