The digital cold war: AI, Blockchain, Fintech, and the U.S.-China battle for financial dominance

Express Tribune

08-02-2025

The world is splitting into two digital ecosystems as the U.S. and China race for financial supremacy. From AI-driven fintech and stablecoins fueling U.S. Treasury demand to the rise of CBDCs and the Splinternet, global finance is entering a new era of geopolitical competition.
The Acceleration of Change
In The World is Changing Faster Than You Think, I highlighted how exponential technologies and macroeconomic shifts are disrupting industries at an unprecedented pace. But this is just the beginning. The real question now is: how do we prepare for what's next?
We are entering an era where technological acceleration will reshape power structures, redefine economies, and challenge long-held assumptions about how the world operates. While some will struggle to keep up, others will capitalize on the opportunities ahead. The difference between the two will be determined by how well they understand the forces at play.
AI, Quantum Computing, and the New Arms Race
The next Cold War won't be fought with aircraft carriers or missile silos — it will be fought with artificial intelligence, quantum computing, and cyberwarfare.
• AI is the new nuclear weapon. The nations and corporations that achieve AI supremacy will dominate global finance, military strategy, and economic power structures.
• Quantum computing will break existing encryption models. Blockchain networks, traditional cybersecurity methods, and even financial transaction security will be reshaped once quantum supremacy is reached.
• The race for AI-driven autonomous systems is escalating. Governments and enterprises alike are pushing for AI-controlled decision-making, reducing reliance on human operators.
Just like the nuclear arms race of the 20th century, the nations and institutions that fail to keep up will find themselves at a permanent technological disadvantage.
The Splinternet and the U.S.-China Race for Global Digital Dominance
The world is no longer operating on a single, unified internet — it is splitting into two competing ecosystems, mirroring the growing geopolitical divide between the U.S. and China.
• Satellite internet is becoming a tool for financial control.
• Countries that adopt one side's satellite infrastructure will be tied to that financial and payment system.
• U.S.-led networks will ensure that only applications complying with its standards operate within its system.
• China-led networks will push for apps that align with its geopolitical and financial standards.
• The fragmentation of financial services
• Digital wallets, stablecoins, and AI-powered fintech will all operate within specific influence zones.
• Payments, e-commerce, and lending models will be determined by which digital system a country adopts.
This is not just about financial services — it's a race for control over the global economic infrastructure. The battle for who controls digital payments, credit, and AI-driven finance will define the next era of financial power.
Starlink vs. Qianfan: The Satellite Internet Race
The global satellite internet race is heating up as China's Qianfan (G60 Starlink) and SpaceX's Starlink compete for dominance. Starlink, operational since 2019, has over 7,000 satellites in low Earth orbit (LEO) and aims to deploy up to 34,400 for worldwide broadband coverage. In contrast, Qianfan, led by Shanghai Spacecom Satellite Technology, plans to launch 15,000+ satellites by 2030 to rival Starlink's network.
While Starlink already provides global services, Qianfan is in early deployment stages, aiming for full coverage by 2027. Both constellations are key components of the U.S.-China digital infrastructure battle, with each nation expanding its satellite internet to strengthen financial, technological, and geopolitical influence worldwide. Countries adopting one of these systems will be tied to that ecosystem, reinforcing the Splinternet divide in global finance, communication, and cybersecurity. The battle for digital dominance is shifting to space, determining which financial and technological systems will define the future.
AI, Blockchain, and the Evolution of Finance
Artificial intelligence and blockchain are no longer fringe technologies; they are becoming the new financial infrastructure.
AI-powered financial models are reshaping traditional risk assessment, underwriting, and trading strategies. Institutions that rely on legacy systems will need to adapt. Blockchain is ushering in a new era of finance where decentralized applications, tokenization, and e-money layers are emerging as consumer-facing solutions.
Banks Are Here to Stay — But They Will Evolve
Despite the rise of fintech applications, DeFi, and e-money layers, banks are not going away — they will evolve into custodians, compliance hubs, and backend infrastructure providers in the new financial system.
• Consumer Finance Moves to Fintech, but Banks Provide the Foundation
• E-money platforms and alternative lending apps are taking over consumer-facing financial interactions.
• However, banks will still control regulatory compliance, custodianship of digital assets, and large-scale capital flows.
• Banks Will Act as Custodians of Digital Finance
• As CBDCs, stablecoins, and tokenized assets gain adoption, banks will serve as compliance enforcers and custody providers.
• Instead of being replaced, banks will consolidate, absorbing smaller institutions and integrating fintech innovations.
The Role of Fintech in Credit Access: Building Alternative Credit Models
One of the biggest structural challenges in developing markets is the lack of formal credit scoring mechanisms.
• No FICO Credit Score Equivalent — Unlike developed economies, many emerging markets do not have centralized credit bureaus or decades of consumer lending data.
• Traditional Banks Aren't Lending — Banks in these markets have historically avoided extending credit to SMEs and individuals without formal banking histories.
• Collateral-Based Lending is the Norm — Due to the lack of data, traditional institutions rely on collateral-based lending, which excludes a large portion of the population from accessing capital.
How Fintech and E-Money Layers are Solving the Problem
Fintechs, non-bank financial institutions (NBFIs), and e-money platforms are now filling the gap by leveraging alternative data models:
• Transactional Data — Digital payments, mobile top-ups, and bill payments are being used as a proxy for creditworthiness.
• AI-Based Risk Scoring — Fintechs are using machine learning models to analyze consumer spending behavior, cash flow patterns, and repayment history to predict risk.
•Gradual Credit Building — Small initial loans (such as payroll advances or buy-now-pay-later financing) allow borrowers to build financial identities over time.
Stablecoins: The Silent Force Behind U.S. Treasuries and Global Liquidity
Stablecoins have become integral to digital finance, facilitating billions of dollars in daily transactions while being backed by reserves that include U.S. treasuries.
This mechanism has reinforced demand for U.S. treasuries, as stablecoin issuers must hold liquid reserves to maintain their peg.
Even policymakers have taken notice. Federal Reserve Governor Christopher Waller has acknowledged the role of stablecoins, describing them as effectively 'synthetic' dollars that could enhance the financial system by eliminating inefficiencies (Reuters).
The Rise of Central Bank Digital Currencies (CBDCs): Pros & Cons
As the financial landscape evolves, central banks worldwide are launching Central Bank Digital Currencies (CBDCs) — a digital form of fiat money aimed at modernizing financial systems.
Advantages of CBDCs:
• Programmable Money: Governments can program CBDCs to stimulate specific sectors, ensure targeted aid distribution, or manage inflation dynamically.
• Financial Inclusion: CBDCs could expand financial services to unbanked populations, reducing reliance on cash-based economies.
• Reduced Transaction Costs: A state-backed digital currency could make financial transactions cheaper and more efficient.
Potential Risks of CBDCs:
• Privacy Concerns: Unlike cash, CBDCs are fully traceable, raising concerns over financial surveillance and personal privacy.
• Increased Government Control: Central banks could directly influence spending behavior, which, if misused, could become a tool for financial overreach.
• Individual Sanctions and Financial Control: CBDCs could allow governments to freeze funds, block transactions, or impose spending limits on individuals, extending financial blacklisting beyond national sanctions.
• Risk of Overreach: In politically unstable regions, CBDCs could be used as a tool to suppress dissent by restricting financial access.
While CBDCs have the potential to increase efficiency and financial inclusion, their implementation must be balanced with safeguards to prevent misuse.
What Comes Next?
In Part 3, I'll explore how AI, digital finance, and automation will force radical transparency and eliminate inefficiencies in economies like Pakistan.
The digitization of everything — finance, payments, trade, mobility — will fundamentally reshape economic structures. Technology will make everyone honest — it's the ultimate form of documentation.
Stay tuned for Part 3.