Smart Money

Brunello Rosa with Casey Larsen · 2024

Thesis

The United States and China are fighting a new cold war whose front line is financial and technological, and digital currencies issued by central banks are one of its main weapons: China's digital yuan is less a tool of domestic surveillance than a means of loosening the developing world's dependence on the dollar, and the West must decide quickly how to respond.

The main ideas

The rivalry between the United States and China is a new cold war fought largely through economics, finance and technology.
Money is changing form, from cash and bank deposits toward digital currencies issued directly by central banks.
Digital money can be programmable, carrying conditions on how and where it is spent.
Western debate about China's digital yuan has focused on surveillance and missed its larger purpose: helping countries trade without the dollar.
The dollar's dominance, the basis of American financial power since the Second World War, faces its first credible digital challenge.
Both adopting and rejecting central bank digital currencies carry large consequences, and the West needs a strategy.

A new cold war

Brunello Rosa is the chief executive and head of research of Rosa & Roubini Associates, a London advisory firm on economics and geopolitics that he founded with the economist Nouriel Roubini. He is a visiting senior fellow at the London School of Economics, teaches at Bocconi University and advises a British parliamentary group on central banks and digital currencies. Casey Larsen works on digital assets at the same firm.

Smart Money was published by Bloomsbury in 2024. Editions carry two subtitles: How Digital Currencies Will Win the New Cold War, and Why the West Needs to Act Now, and How Digital Currencies Will Shape the New World Order. The Financial Times included it among the best economics books of 2024.

Its argument begins with geopolitics. The era of the Washington Consensus, when American-led globalization seemed unchallenged, has given way to a bipolar world, with China's rise creating a rivalry fought over trade, resources, technology and money.

Implication: read changes in the technology of money as moves in a geopolitical contest, not only as technical upgrades.

The new era of money

Most money today exists as deposits in commercial banks. A central bank digital currency, or CBDC, would be digital money issued directly by a central bank, like cash but in electronic form.

The authors describe the spread of digital payments and the rise of private digital money, including cryptocurrencies, as pressures pushing central banks to issue their own. Rosa has described a CBDC, technically, as a change on the liability side of a central bank's balance sheet. Its consequences, he argues, are far larger than that description suggests.

Dozens of central banks have studied or tested digital currencies. China has gone furthest among major economies with its digital yuan, or e-CNY.

The mechanism is that whoever controls the infrastructure of payments gains influence over the transactions that pass through it, so the design of digital money is also a question of power.

Implication: when a country builds new payment infrastructure, ask who will control it and who will be able to see and stop the transactions it carries.

Smart money

The book's title refers to a feature of digital currencies: they can be programmable. Unlike cash, digital money issued by a central bank can carry built-in conditions, specifying, for example, how, when or where it can be spent.

Programmability could make some policies more effective. A government could target stimulus payments or ensure that aid is spent as intended. It also raises obvious risks: money that can be programmed can be restricted, tracked or switched off.

The authors acknowledge the privacy debate but argue that, for the West, it is not the most important question about China's digital currency.

The mechanism is that money which carries rules gives its issuer a degree of control over economic life that cash never allowed.

Implication: judge any proposal for programmable money by who sets the rules and what limits are placed on their power to change them.

Digital de-dollarization

The book's central argument concerns the dollar. Since the Second World War, the dollar has been the world's main currency for trade, reserves and finance, giving the United States great power, including the ability to impose sanctions by cutting countries off from the dollar system.

Western coverage of the digital yuan, the authors argue, focused on its use as a tool of surveillance within China. The more important point is its potential to de-dollarize the developing world, especially in trade. A digital currency that allows countries to settle trade outside the dollar system would weaken American financial power, particularly among countries tied to China through trade and investment.

The mechanism is that sanctions and financial pressure work only as long as other countries need the dollar, and alternatives reduce that need.

Implication: watch which countries settle trade outside the dollar and through what systems, since that is where the dollar's power will erode first, if it erodes.

What the West should do

The book ends by asking how the West should respond. Its authors argue that both embracing and rejecting central bank digital currencies carry immense consequences, and that inaction is itself a choice that cedes ground.

In their view, the West needs a deliberate strategy for digital money, rather than leaving the field to China's alternative.

The mechanism is that standards in technology tend to be set by whoever builds and deploys first, and the countries that adopt a system become dependent on it.

Implication: in a contest over infrastructure, waiting to see what others build can mean living with what they built.

Limits

It is a geopolitics book more than a guide to digital currencies. Readers have noted that central bank digital currencies are one dimension of a broader argument about superpower rivalry, and that technical detail is limited.
Its framing is hawkish. The bipolar, cold-war lens may overstate the speed and coherence of de-dollarization, and the book offers limited evidence on how much the digital yuan is actually used in international trade.
Events have moved against its prescription. In 2025 the United States barred federal agencies from creating a digital dollar and passed a law regulating dollar stablecoins, choosing private digital dollars over a central bank currency.

Devil Take the Hindmost — the long history of financial innovation and the speculation it invites.
Brave New World — a fictional society controlled through its systems rather than by force.