Nemanja Plotan is a political economist currently serving as a Geopolitical Risk Analyst at the Vienna-based GEA Group, a global technology supplier in the food processing industry.
It has been more than 80 years since the representatives of 44 countries met at the Mount Washington Hotel in Bretton Woods to discuss the contours of the new international monetary system that would ensue after the end of the global conflict. The result of the meeting was the creation of the International Monetary Fund and the establishment of the U.S. dollar as the world’s reserve currency. However, rapid geopolitical, economic, technological, and migratory shifts that the world has undergone over the last 30 years have brought the entire international financial system to a state of disarray and instability. No longer can the system established by the victors of World War II successfully neutralize internal and external threats.
As a result, the new global economic order is becoming more fragmented and fragile, which raises the question of what the future of the international financial system will look like. In addition, the focus of U.S. President Donald Trump on “America First” policies, the abolition of USAID, and the looming prospect of a U.S. withdrawal from the IMF suggest a shift in American economic policy toward isolationism, rendering the final verdict of geoeconomic fragmentation, which at this point appears almost irreversible.
From Sanctions to Geoeconomic Fragmentation
Originally, the rationale behind economic sanctions was to curb and respond to aggressive state behavior. However, the United States and its Western allies began employing sanctions unilaterally against any state, entity, organization, or individual whose actions they did not approve of. The primary reasoning behind economic sanctions was to make the population of the sanctioned state suffer to the extent that it would lead to a change in policy or, better yet, a change of government. However, historical records tell a story of the inefficiency of economic sanctions, as they have rarely achieved their desired outcomes—much of which is abundantly clear today when one examines the cases of Russia, North Korea, Iran, China, Venezuela, and Cuba.
The evolution of economic sanctions has led to so-called extra-territorial or indirect sanctions, which are accomplished by sanctioning individuals and firms for their association with the sanctioned state or by prosecuting banks that do business with such individuals. In 2014, BNP Paribas had to pay $8.9 billion in fines to the United States for processing financial transactions for countries subject to U.S. sanctions. This was possible due to the highly globalized nature of international finance, which can be easily surveilled. The key leverage that the United States has exercised over the world is its influence over the key financial infrastructure for cross-border payments between individuals and businesses: SWIFT.
The Society for Worldwide Interbank Financial Telecommunication, commonly referred to as SWIFT, is a messaging system that links more than 11,000 global banks, ensuring that most of the world’s trade is invoiced in dollars. Although officially a non-political messaging system, it conforms to the wishes of Washington and its allies. In 2012, the United States forced SWIFT to block all financial transactions with Iran, causing Tehran to lose half of its revenue from oil exports and 30 percent of its trade. Similarly, in 2014, the United States threatened to block Russia’s financial transactions following the latter’s annexation of Crimea.
As a result, Russia developed its own messaging system in 2014, called SPFS, which processes invoices in rubles and links more than 550 banks and organizations as of the end of 2023. Russia has also been actively working with Chinese officials to link the SPFS with the Chinese version of SWIFT, the CIPS, a system launched in 2015. As of May 2024, the CIPS has more than 1500 direct and indirect participants, and it invoices its transactions in Chinese yuan. The two alternatives suggest a proactive approach by great powers to establish a global financial system independent of U.S. influence and indicate a clear path of geoeconomic fragmentation currently taking place in the global economy.
The End of Financial Hegemony
In the prevailing international monetary system, the U.S. dollar still holds the role of the world’s reserve currency. In the 1960s, then French Minister of Finance Valéry Giscard d’Estaing coined a special term for the American dollar: “exorbitant privilege.” This means that the dollar and dollar-backed securities, such as U.S. Treasury bonds, are much more attractive than other currencies. Because of this, the United States has the privilege of issuing debt at a much lower rate than other countries around the world. In theory, if the U.S. wishes to do so, it can depreciate its own currency and thereby reduce the amount of its debt. Such a move would have a serious impact on the rest of the world and is therefore not a realistic option. However, the United States is in a position to borrow in its own currency, and U.S. companies have the privilege of conducting international business in dollars, thereby avoiding the costs associated with currency conversion. In essence, the U.S. can accumulate historically high deficits, which it can use to finance its global financial and geopolitical hegemony, without having to suffer the consequences of deficit spending like most other countries do.
Therefore, to achieve a multipolar world order, as BRICS members advocate—first and foremost Russia and China—the U.S. dollar must be dethroned. Although there were discussions about BRICS creating a new currency backed by the natural resources of its member states, President Trump stated that he would impose 100 percent tariffs on BRICS countries if they dared push for a common currency, bringing the initiative to a halt—at least during Brazil’s 2025 presidency over the group.
BRICS will thus focus on reducing dependence on the dollar in international trade. In 2023, Russia became China’s main trading partner, reaching a record high number of $200 billion in transactions, which was 95 percent invoiced in Russian ruble and Chinese yuan. This indicates that the path taken by Russia and China will be the de-dollarization of bilateral trade among BRICS members.
Recent technological developments, such as Distributed Ledger Technology, are already reshaping international finance and geopolitics. These technologies have not only created volatile cryptocurrencies such as Bitcoin and Ethereum but have also led to the emergence of Central Bank Digital Currencies (CBDCs), which are cryptocurrencies issued by the central bank. The survey conducted by the Bank for International Settlements in 2023 suggests that 94 percent of central banks are exploring their own CBDCs. Through the global development of CBDCs, central banks are essentially creating a new international financial infrastructure, in which the U.S. dollar could lose its place as the world’s reserve currency.
One of the most significant developments in this new financial infrastructure is Project mBridge, a multi-CBDC platform spearheaded by the BIS Innovation Hub, China, the UAE, Thailand, and Hong Kong, with Saudi Arabia joining in 2024. The project leverages Distributed Ledger Technology to facilitate instant cross-border payments and settlements, unlike traditional SWIFT-based transactions, which rely on costly and time-consuming correspondent banking networks. Russia has also been pushing for the implementation of CBDCs in cross-border payments, to surpass the Western sanctions. This innovation is particularly important for de-dollarization efforts, as it enables countries to settle trade in their own digital currencies without relying on the U.S. financial system.
Project Agorá, launched in 2024 by the Bank for International Settlements (BIS) in collaboration with seven central banks—the Bank of France (Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and the Federal Reserve Bank of New York—explores how tokenized central bank money and commercial bank deposits can streamline cross-border payments. By integrating these assets into a unified programmable financial platform, it seeks to enhance transaction speed, reduce costs, and improve financial integrity controls. If successful, Project Agorá could accelerate the shift toward a multipolar financial order by reducing dependence on the dollar-based banking infrastructure, as well as by creating another financial platform independent of other platforms such as mBridge.
Following Trump’s ban of CBDCs, the United States is slowly losing its position as the global leader in financial innovation, thereby leaving more space for European and Asian countries. If the BRICS countries decide to tokenize their gold reserves, i.e. back their CBDCs with gold, they could potentially dethrone the dollar and end the financial hegemony of the United States.
