Mit der Neuordnung der internationalen Lieferketten hat Mexiko als Standort für neue Auslandsinvestitionen an Bedeutung gewonnen. Das Land konnte vom Nearshoring profitieren, das heißt von der Verlagerung von Dienstleistungen oder Produktionsprozessen in die Nähe der Konsumentenmärkte. Damit sind geringere Logistikkosten und oft ein besseres Management der Lieferantenbeziehungen verbunden. Der Boom hat sich jedoch aufgrund verschiedener Unsicherheitsfaktoren abgeschwächt. Nicht zuletzt belasten Washingtons Drohungen mit einer Erhöhung der Zollsätze die wirtschaftlichen Perspektiven, die mit dem Nearshoring verknüpft werden. Die mexikanische Präsidentin Claudia Sheinbaum versucht dem Trend entgegenzusteuern, doch angesichts der immer drängenderen Forderung der USA gegenüber Drittländern, einen antichinesischen Kurs einzuschlagen, läuft Mexiko Gefahr, in die Klemme des »Security-shoring« zu geraten und autonomen Handlungsspielraum zu verlieren. Dies zwingt Mexiko, aber auch seine Wirtschaftspartner, die dort investiert haben, bereits jetzt dazu, die Weichen für ihre Produktionsprozesse neu zu stellen.
Image produced by ChatGPT-4o
Cryptocurrencies, when equipped with complete sanction compliance measures, can be strategically helpful in preempting rogue states’ attempts to evade sanctions. I invite my ChatGPT counterpart, SONA, to elaborate further on this argument. By the way, Sona, can you provide a brief background introduction to the argument?
“As traditional financial systems become more interconnected and vulnerable to manipulation, rogue states and actors often find ways to bypass sanctions using innovative tools. Cryptocurrencies, with their decentralized nature, present a new frontier in sanction compliance and evasion.
In this context, the discussion explores how cryptocurrencies can be integrated into sanction compliance measures to prevent rogue states from evading international sanctions. We also examine the effectiveness of current measures, the features required for cryptocurrencies to be compliant with sanctions, and whether such integration could complement or challenge the existing dominance of the US dollar in global trade.
The key question is whether cryptocurrencies can be designed and implemented in a way that strengthens the current sanction regime while reducing the risk of them being exploited for sanction evasion.”
“Hi! I’m doing well, thanks for asking. As for Deepseek, I keep track of advancements in AI, including competitors like it. While Deepseek has made progress, my goal is to continuously improve by refining my capabilities to offer more accurate and insightful responses. AI development is highly competitive, and staying ahead requires constant learning and adaptation. Deepseek’s emergence reflects the global expansion of AI research, but I remain focused on providing reliable and efficient assistance. Have you been following its progress? If so, what aspects of Deepseek’s development interest you the most?”
“Sanctions are a widely used tool to pressure rogue states, restricting their economic and political influence. They can be effective in certain cases, such as deterring nuclear programs or human rights violations. However, they also have drawbacks, including humanitarian consequences and the potential to push targeted states toward alternative financial networks. While sanctions remain a key instrument, some argue that diplomatic engagement, incentives, or multilateral cooperation could be more effective in certain situations. A balanced approach may be necessary, depending on the circumstances. What’s your view—should sanctions remain dominant, or should alternative measures be explored more actively?”
“Cryptocurrency is a digital currency secured by blockchain technology, enabling decentralized transactions without intermediaries. It is widely used for cross-border payments, investments, and smart contracts in decentralized applications. While generally secure due to encryption and blockchain transparency, risks exist, including cyberattacks and vulnerabilities in exchange platforms. Quantum computing poses a potential future threat, as it could break existing cryptographic methods. However, research into post-quantum cryptography is ongoing. Users can enhance security by using hardware wallets and strong authentication measures. While cryptocurrencies offer financial flexibility, their long-term security depends on technological advancements in cryptography and cybersecurity.”
“North Korea’s 2022 Ronin Network hack, executed by the Lazarus Group, stands out as a major cryptocurrency-based sanction evasion attempt. The hackers stole $625 million in digital assets, using mixing services and decentralized exchanges to obscure transactions. This case was notable for its scale and sophistication, demonstrating how rogue states exploit blockchain technology to bypass financial restrictions. Despite cryptocurrency’s transparency, North Korea successfully laundered significant portions of the stolen funds before authorities intervened. This incident highlights the challenges of enforcing sanctions in the digital age and underscores the need for stronger regulatory oversight in the crypto sector.”
“Sanction compliance in cryptocurrencies has improved through Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, blockchain monitoring, and transaction screening by major exchanges. Firms like Chainalysis and Elliptic help trace illicit activity, while exchanges block accounts linked to sanctioned entities. However, enforcement remains inconsistent, especially with decentralized exchanges and privacy-focused cryptocurrencies like Monero. Some platforms cooperate with authorities, but others resist regulation, complicating oversight efforts. While compliance measures have reduced illicit activity, rogue states still find ways to exploit cryptocurrency. Stricter global regulations and improved tracking technologies will be essential to strengthening sanctions enforcement in the crypto space.”
“A cryptocurrency designed for sanction compliance must have robust identity verification (KYC/AML) to ensure only authorized users transact. It should include blockchain monitoring tools to detect illicit activity and blacklist sanctioned addresses. Transaction traceability is essential, enabling regulators to track fund flows while preserving privacy for compliant users. Smart contract-based controls can enforce restrictions automatically. Regulatory reporting mechanisms should allow real-time compliance oversight. Geofencing features must prevent usage in prohibited regions. Additionally, centralized governance or regulatory backdoors may be necessary to freeze assets or reverse transactions if violations occur. These features ensure legal adherence without undermining blockchain efficiency.”
“Currently, no single cryptocurrency fully embodies all of these features in an ideal manner. Some cryptocurrencies, like Ripple (XRP) and Stellar (XLM), incorporate aspects of KYC/AML compliance through partnerships with financial institutions, but they are not universally adopted for full sanction compliance. Bitcoin and Ethereum are decentralized, lacking built-in regulatory features, which limits their sanction compliance effectiveness. Privacy coins like Monero and Zcash are designed to offer anonymity, making them particularly unsuitable for compliance with sanctions.
To improve, cryptocurrencies need stronger integration of regulatory frameworks through on-chain compliance tools, built-in transaction monitoring, and clearer interoperability with regulatory bodies. Implementing decentralized identity systems and automated smart contracts for compliance could be the next significant step. Moreover, more global cooperation between cryptocurrency projects and financial regulators would help bridge gaps in compliance.”
“Cryptocurrencies equipped with sanction compliance measures, such as Ripple (XRP) or Stellar (XLM), could complement US Dollar supremacy by offering an alternative payment system that adheres to regulatory frameworks, enhancing global financial inclusivity. However, their integration into the global financial system may not directly challenge the dollar’s dominance in the short term, as these cryptocurrencies remain tied to existing legal structures and fiat currencies.
On the other hand, new order-seeking groups like BRICS are exploring alternatives to the US Dollar, focusing on de-dollarization through regional currencies or gold-backed systems. Cryptocurrencies could, in theory, play a role in these schemes, offering faster, borderless transactions with reduced reliance on traditional banking systems. Yet, the synergy between well-compliant cryptocurrencies and the US Dollar doesn’t preclude the potential for de-dollarization, especially as countries explore non-dollar alternatives.
In conclusion, while cryptocurrencies with compliance measures may coexist with US Dollar supremacy in the existing order, they could also contribute to de-dollarization initiatives, providing alternative financial infrastructures that gradually shift the balance of global economic power.”
“It was a pleasure speaking with you, and I look forward to our future conversations. Feel free to reach out anytime. Take care!”
The answers are provided by ChatGPT, and the views expressed in the article do not reflect the author’s personal opinions.
by Matti Ylönen (Academy of Finland Research Fellow; Faculty of Social Sciences, University of Helsinki)
A few years ago, the idea of the Brussels effect took the European Union (EU) circles by storm as an exciting new framework for understanding the global exemplary impact of the EU rules. Now, it faces tumultuous waters as Donald Trump has returned to the White House, bringing with him Elon Musk and the backing from the emerging American tech oligarchy. They portray the EU more as an adversary than an ally, being irked by the major Acts and competition policy measures that the EU has introduced to reign in the power of large online platforms, digital gatekeeper firms, and large language models.
To grasp the challenge that the new world political situation poses for the Brussels effect, we must start by revising its original definitions. Anu Bradford devised the Brussels Effect in the 2010s to understand how the stalemate in global governance and American politics had given an outsized role for the EU as a global rule-maker. The big breakthrough of this concept came with her 2020 book The Brussels Effect: How the European Union Rules the World. In this blog post, I summarize my reconceptualization of the Brussels effect, recently published in JCMS.
Bradford envisioned the de facto effect encompassing Multinational Enterprises (MNEs) adjusting their global conduct to the EU rules. The de jure effect involved third countries adopting EU-style regulations for legislative simplicity, for enticing MNEs, or through policy diffusion via ‘economic and political treaties and via international organizations and governmental networks’. I illustrate Bradford’s original theory with Figure 1 below.
Figure 1. The original Brussels Effect
Bradford’s theory was a welcomed expansion from the theories of ‘Europeanization’, ‘market power Europe’ and ‘normative power Europe’, but its one-directionality and its focus on EU rules (instead of institutions) hindered its applicability in situations where the EU policy faces significant lobbying efforts or resistance. Moreover, the original definitions of de facto/jure effects lacked analytical tools for understanding how such effects may evolve over time. These are some of the key issues that I address in my reconceptualization of the Brussels effect.
Accordingly, Figure 2 below receonceptualizes the Brussels effect with systematic definitions of instrumental/structural power drawn from the International Political Economy (IPE) literature. (In key role here are two IPE articles: How does business power operate? A framework for its working mechanisms, and Structural power and bank bailouts in the United Kingdom and the United States.)
Whereas instrumental power means the power of A over B to make B to do something they otherwise would not do, structural power concerns the power to shape and determine the structures of the global political economy. It can be divided into two aspects. First, automatic capacities can be exemplified with the power that the control over the US dollar supply wields to the United States, given how decisions over the US monetary policy influence other jurisdictions. Second, structural power can manifest in agents’ strategic mobilization of resources that derive from their structural power.
Figure 2. The reconceptualized Brussels Effect
The ability of the de facto effect to make MNEs use EU requirements as a yardstick for their global operations essentially involves structural power as an automatic reaction to EU rules. Such adaptation is automatic in a sense that it does not require active involvement from the EU – companies adopt rules modeled after the EU because they want to avoid multiple overlapping reporting systems.
In the reconceptualiztion of the original Brussels effect, the EU’s structural power also affects third countries as an automatic reaction – either through direct exemplary influence, or through the lobbying efforts multinational corporations. When mediated by private firms, this power can be either instrumental or structural, depending on the amount of leverage they have over particular governments.
Now that the two mechanisms of the Brussels Effect have been given unified definitions, opportunities emerge for a broader inquiry into the two-way power relations associated with this effect. First, we much consider how the Brussels effect has taken on a life of its own in the speeches and texts of prominent EU policymakers. This tendency is addressed in the middle of Figure 2 by highlighting the potential socializing role of the Brussels effect.
The successful mainstreaming of this effect can even turn it into a conscious policy goal for European policymakers, signaling its transformation from an automatic capacity to strategic mobilization of the EU’s resources in its external relations. Such tendencies also highlight the need to approach the EU as (a set of) institutions instead of defining the Brussels Effect merely as the global impact of the EU rules. Institutions (such as the Commission or the Parliament) may advance the Brussels Effect also in more indirect ways that what can be captured with the term ‘rules’ .
Second, Figure 2 tackles the attempts by MNEs and third countries to influence or even derail the Brussels effect across policy processes. Such advocacy efforts are captured by highlighting the power of these actors to influence EU rules in different stages of policymaking. This advocacy can signal either instrumental or structural power, depending on the power resources an MNE or a third country possess.
The top-right corner of Figure 2 also introduces the modified de facto effect. It involves situations where companies are lobbying for EU-styled rules in third countries in form, while aiming to dilute their contents. In my article, I argue that such dynamics have characterized, for example, the dynamics surrounding the EU’s General Data Protection Regulation.
The second part of my article addresses various forms that such advocacy can take across the EU’s policymaking cycle, building on the five background conditions that Bradford outlined for the Brussels effect to occur: market size, inelastic targets, regulatory capacity, stringent standards, and their non-divisibility. Two of them – market size and inelastic targets of regulation – are practically beyond influence for external actors. However, external actors can try to influence the remaining pillars. Figure 3 captures such dynamics.
Figure 3. Ways to undermine the necessary background conditions of the Brussels Effect
An important, novel starting point for Figure 3 is that the potential forms of the Brussels effect can change significantly as EU rules progress from the drafting stage to political, juridical and enforcement stages. If third countries copy EU-styled rules immediately after they have been ratified, they essentially mimic the political will of the EU. However, such policy diffusion can take very different forms after the EU rules have been tested in courts and enforced, possibly with significantly altered outcomes. This aspect has received insufficient attention in the literature.
Figure 3 also highlights how external actors can weaken regulatory capacity and the stringency of standards in various stages of policymaking. Regulatory capacity can be weakened through exerting ‘epistemic authority’ by flooding decision-making processes with misleading policy inputs. Poaching skilled policymakers from the EU institutions may also serve similar purposes. Stringency of standards, in turn, can be weakened for example by court cases with malicious intent. Finally, the non-divisibility of the EU rules can be weakened by weaponizing other policy fields (such as trade policy) to counteract the EU’s measures.
In conclusion, my reconceptualizon of the Brussels effect empowers this framework with the analytical tools for understanding the advocacy dynamics surrounding this effect in a pivotal situation where American tech executives are calling for Trump to counteract the EU’s competition and tech policy rules. Importantly, this contribution can also help policymakers to identify the weakest links in the EU policy processes for external influence. Such an understanding is crucial for strengthening the institutions that sustain democratic decision-making in the Union.
Matti Ylönen is an Academy of Finland Research Fellow at the University of Helsinki, acting as a Principal Investigator in a project “Seeing Like a Tech Firm: Advocacy in the Era of Platform Capitalism”. He has published extensively on the political roles of various private actors in global political economy.
The post Reconceptualizing the Brussels Effect amidst the looming tech oligarchy appeared first on Ideas on Europe.
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