A digital yuan payment demonstration in Toronto, Canada, May 2017
Mark Blinch / Reuters

Imagine that it is 2022 and the United States has received intelligence from the Mossad that Iran is procuring essential components for nuclear weapons and missile programs. U.S. economic sanctions on Iran remain in place, but Iran has shifted much of its international commerce to a new yuan-based system—a Chinese digital currency that allows Tehran to avoid dollar transactions and thus evade U.S. financial institutions. As a result, Iran’s oil sales to China, India, and Europe are up, providing the Iranian regime with critical revenue streams that U.S. authorities cannot monitor. And when Iran decides to move quickly toward the development of nuclear weapons and new medium-range missiles to deliver them, the United States can no longer turn to sanctions as one of its primary means of responding to the threat.

This scenario may seem far-fetched given the long-standing dominance of the dollar. But in late

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  • ADITI KUMAR is Executive Director of the Belfer Center at the Harvard Kennedy School.
  • ERIC ROSENBACH is Co-Director of the Belfer Center at the Harvard Kennedy School and former U.S. Assistant Secretary of Defense.
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