Part 0: Read This First | Part 1: Undersea Cable Empire | Part 2: Satellite Sovereignty | Part 3: DNS Dictatorship | PART 4: PAYMENT RAILS | Part 5: The Cloud Is Someone's Computer | Part 6: Credential Wars
Part 4: Payment Rails
SWIFT vs. CIPS—Who Controls the Pipes That Move Money?
February 26, 2022. Two days after Russia invades Ukraine, the US, EU, UK, and allies announce unprecedented sanctions: Russia's major banks are cut from SWIFT, the global financial messaging system. $300+ billion in Russian central bank reserves, held in Western institutions, are frozen. Russian businesses lose the ability to send or receive international payments. Credit cards stop working abroad. Trade grinding to a halt. Western media declares this the "financial nuclear option"—economic warfare without firing a shot. But here's what actually happened: Russia didn't collapse. The ruble crashed initially, then recovered. Trade with China, India, Turkey continued—just through different rails. By 2023, Russia was routing payments through Chinese banks using CIPS (Cross-Border Interbank Payment System), using cryptocurrency for some transactions, relying on correspondent banking relationships in neutral countries. SWIFT sanctions hurt, but they didn't paralyze. Why? Because Russia, anticipating exactly this scenario since 2014 (Crimea sanctions), spent eight years building financial infrastructure independence. They reduced dollar reserves, increased yuan holdings, developed alternative payment systems, and deepened ties with China's financial infrastructure. The lesson wasn't "sanctions don't work." It was: "sanctions only work if your target depends on YOUR payment rails." And the world's second superpower was building its own rails the entire time. Welcome to the payment rail wars—the most weaponized layer of global infrastructure.
What SWIFT Actually Is
Most people think SWIFT moves money. It doesn't. SWIFT is a messaging system—the WhatsApp of international finance. It transmits payment instructions between banks.
How international payments actually work:
You're in the US. You want to pay a supplier in Germany. Your bank (Chase) needs to send money to their bank (Deutsche Bank). But Chase and Deutsche don't directly hold accounts with each other. So:
- Chase sends a SWIFT message to Deutsche: "Pay 10,000 EUR to Supplier Account 12345"
- The message routes through SWIFT's network (encrypted, standardized format)
- Deutsche receives the message, credits the supplier's account
- Settlement happens later through correspondent banks or central bank systems
SWIFT doesn't touch the money. It's the communication infrastructure that makes the money move. But without SWIFT, banks can't coordinate transfers efficiently. Correspondent banking (the alternative) is slow, expensive, and limited in scale.
SWIFT's scale (2026):
- 11,000+ member institutions (banks, brokerages, exchanges) in 200+ countries
- 44+ million messages per day (instructions for payments, securities, trade finance)
- $5-7 trillion in payment instructions daily (not actual money moved, but payment coordination)
- Founded 1973 (replacing slow telex systems)
- Headquartered in Belgium (technically neutral, but see below)
DAILY MESSAGES: 44+ MILLION
• Payment instructions: ~60%
• Securities transactions: ~25%
• Trade finance: ~10%
• Treasury/FX: ~5%
VALUE COORDINATED: $5-7 TRILLION/DAY
• Cross-border payments
• International wire transfers
• Letters of credit
• Securities settlement instructions
MEMBER INSTITUTIONS: 11,000+
• Commercial banks: 85%
• Investment banks: 8%
• Market infrastructure: 5%
• Corporates: 2%
GEOGRAPHIC REACH: 200+ COUNTRIES
• Europe: 40% of traffic
• North America: 25%
• Asia-Pacific: 25%
• Rest of world: 10%
THE DEPENDENCY:
Cut from SWIFT = lose efficient international payments.
Alternatives exist but are slower, more expensive, limited scale.
The SWIFT Monopoly: Belgian Company, American Veto
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a Belgian cooperative owned by its member banks. It's technically neutral, governed internationally, and subject to Belgian/EU law.
Except it's not that simple.
The US Veto Power
SWIFT operates globally but has significant US exposure:
- US correspondent banks: Most international payments touch a US bank at some point (dollar clearing, correspondent relationships)
- US legal jurisdiction: Any transaction involving dollars or US entities can be subject to US law
- Treasury Department pressure: US can threaten sanctions against SWIFT itself if it doesn't comply with US sanctions
- Data access: After 9/11, SWIFT granted US Treasury access to transaction data (Terrorist Finance Tracking Program)
In practice, this means: If the US wants to sanction a country, it can pressure SWIFT to disconnect that country's banks—even though SWIFT is Belgian and many transactions don't involve dollars.
The Sanctions History
Iran (2012): First time SWIFT disconnected a country's banks. Iranian banks lost SWIFT access, crippling international trade. Iran's oil exports collapsed. Economy contracted. This was more effective than decades of traditional sanctions.
North Korea (2017): SWIFT access severely restricted. North Korean banks operate through front companies and Chinese intermediaries.
Russia (2014 - partial): After Crimea annexation, US threatened SWIFT disconnection. SWIFT didn't comply fully, but Russia started building alternatives.
Russia (2022 - major): After Ukraine invasion, major Russian banks (Sberbank, VTB, others) cut from SWIFT. Estimated 70% of Russian banking system affected.
Why SWIFT Complies
SWIFT is supposedly neutral, but it complies with US sanctions because:
- US market access: SWIFT needs US banks as members. If US banks exit, SWIFT loses relevance.
- Dollar dominance: 40%+ of SWIFT traffic involves dollars. Cut from dollar clearing = massive operational disruption.
- Secondary sanctions threat: US can sanction SWIFT itself for facilitating transactions with sanctioned entities.
- EU alignment: On major geopolitical issues (Iran, Russia), EU generally aligns with US, giving political cover.
The result: SWIFT is the global standard, but it's effectively a tool of US/Western financial power.
China's CIPS: Building the Alternative Rail
China watched Iran get cut off (2012) and Russia threatened (2014). The lesson was clear: dependence on SWIFT is a strategic vulnerability.
Solution: Build a parallel system that doesn't depend on Western infrastructure.
CIPS: Cross-Border Interbank Payment System
Launched: 2015 (Phase 1), expanded 2018 (Phase 2)
Purpose: Facilitate cross-border yuan (RMB) payments without SWIFT dependency
Operator: CIPS Co., Ltd (Shanghai-based, backed by People's Bank of China)
Current scale (2026):
- 1,400+ participating institutions (banks from 100+ countries)
- $12+ trillion in annual transaction value (2025 estimate, growing 40-50% YoY)
- Average daily volume: 50,000+ transactions
- Coverage: Asia-Pacific focus, expanding to Belt & Road countries, Russia, Middle East
How CIPS differs from SWIFT:
- SWIFT: Messaging system only, doesn't handle settlement
- CIPS: Messaging + clearing + settlement in one system
- SWIFT: Multi-currency (dollar-dominant)
- CIPS: Yuan-focused (facilitates RMB internationalization)
- SWIFT: Belgian/international governance, US influence
- CIPS: Chinese-controlled, immune to Western sanctions
CIPS Growth Trajectory
CIPS started small but is accelerating:
- 2016: $1 trillion annual volume
- 2020: $5 trillion
- 2023: $8 trillion
- 2025: $12+ trillion (estimate)
- 2030 projection: $30-50 trillion (if growth continues)
Key adopters:
- Russia: After 2022 SWIFT sanctions, massively increased CIPS usage (yuan became top foreign currency in Russian trade)
- Iran: Uses CIPS for trade with China (largest trading partner)
- Belt & Road countries: Pakistan, Saudi Arabia, UAE, Indonesia, others adopting CIPS for China trade
- BRICS nations: Brazil, India, South Africa exploring CIPS for intra-BRICS trade
The Strategic Purpose
CIPS isn't just about payments—it's infrastructure for a China-centric financial order:
- Yuan internationalization: CIPS makes it easier to transact in RMB globally, reducing dollar dependence
- Sanctions immunity: Countries cut from SWIFT can still trade via CIPS
- Geopolitical leverage: China can offer CIPS access as strategic inducement (or deny it as punishment)
- Dollar bypass: Direct yuan-ruble, yuan-riyal, yuan-rupee settlements avoid dollar entirely
1. CORRESPONDENT BANKS (The Dollar Gatekeepers)
• Major banks (JPMorgan, Citi, HSBC, Deutsche) hold accounts for smaller banks
• Act as intermediaries for cross-border payments
• If correspondent banks cut ties, you're isolated from dollar system
• US can pressure correspondents to drop sanctioned entities
2. SWIFT DATA CENTERS
• Primary: Culpeper, Virginia (US) + Brussels (Belgium)
• Backup: Zoetermeer (Netherlands)
• Physical infrastructure for message routing
• US has requested (and received) access to transaction data
3. DOLLAR CLEARING SYSTEMS
• Fedwire (US Federal Reserve)
• CHIPS (Clearing House Interbank Payments System, US private)
• All dollar transactions ultimately clear through US-controlled systems
• This gives US veto power over dollar-denominated transactions
4. SETTLEMENT SYSTEMS
• CLS Bank (Continuous Linked Settlement - FX transactions)
• Euroclear/Clearstream (securities settlement)
• Located in US/EU jurisdictions, subject to sanctions
5. SANCTION SCREENING SOFTWARE
• All major banks use US-origin compliance software (Fiserv, Jack Henry, etc.)
• Software checks OFAC lists, SDN (Specially Designated Nationals)
• Even non-US banks use US sanction screening tools
CONCLUSION:
Payment rails have more chokepoints than any other infrastructure layer.
Cut cables → traffic reroutes. Fragment DNS → regional internets function.
Cut from payment rails → you can't transact internationally. Period.
The Sanctions Playbook: What Happens When You Lose Access
Iran (2012-2016, 2018-present)
Sanctions imposed: Cut from SWIFT, US dollar transactions prohibited, correspondent banking cutoff
Immediate impact:
- Oil exports dropped 50% (buyers couldn't pay easily)
- Currency collapsed (60%+ devaluation)
- Inflation spiked (40%+)
- GDP contracted 5-10% annually
Adaptation (over years):
- Barter trade (oil for goods with Turkey, India)
- Cryptocurrency usage (limited but growing)
- Chinese yuan trade via CIPS
- Front companies in Dubai, Turkey for banking
- Physical cash smuggling (literally suitcases of euros)
Outcome: Iran survived but economy severely damaged. Never fully recovered to pre-sanction levels.
Russia (2022-present)
Sanctions imposed: Major banks cut from SWIFT, $300B+ reserves frozen, correspondent banking restrictions
Immediate impact:
- Ruble crashed 30% (recovered within months)
- Stock market closed for weeks
- Capital controls imposed
- Western companies exited
Adaptation (within year):
- Massive CIPS adoption (yuan became #1 foreign currency in Russian trade by 2023)
- Direct currency swaps (ruble-yuan, ruble-rupee, ruble-lira)
- Increased crypto usage (though limited)
- Trade rerouted (China, India, Turkey became key partners)
- Domestic payment system (Mir cards) expanded
Outcome (as of 2026): Russia's economy contracted initially but stabilized. Trade continues via alternative rails. SWIFT sanctions hurt but didn't collapse the economy—because China provided an alternative infrastructure.
The Pattern
Payment rail sanctions are devastating IF the target has no alternatives. Iran (2012) had no alternatives—it collapsed. Russia (2022) had CIPS—it survived.
This is why CIPS matters strategically. It's not just a payment system—it's sanctions immunity infrastructure.
OFAC Sanctions Lists:
US Treasury site: treasury.gov/ofac
Lists all sanctioned individuals, entities, countries.
Search SDN (Specially Designated Nationals) list.
See who's cut from US financial system.
SWIFT Traffic Data:
SWIFT publishes monthly RMB Tracker reports.
Shows yuan's growing share of international payments.
Track CIPS growth indirectly via yuan payment volume.
Experiment:
Try to send money to Iran or North Korea via normal banking.
Your bank will block it (OFAC screening).
That's payment rail chokepoints in action.
SWIFT (The Messaging Monopoly):
Revenue: ~$1 billion/year
Members: 11,000+ institutions paying fees
Message fees: Varies by volume, avg ~$0.05-0.50 per message
44M messages/day = $2.2M-$22M daily revenue
CORRESPONDENT BANKING MARGINS:
Major banks (JPM, Citi, HSBC) earn fees on every transaction
FX spread: 1-3% on currency conversion
Wire fees: $15-50 per international transfer
Nostro account interest: Banks hold deposits, earn interest
Annual correspondent banking revenue: $200B+ globally
CIPS (The Alternative):
Exact revenue not public (state-owned)
Lower fees than SWIFT/correspondent banking (competitive advantage)
$12+ trillion annual volume × ~0.01% fees = $1B+ revenue potential
TAKEAWAY:
Payment rails generate massive fees.
Banks profit from being intermediaries.
Whoever controls rails controls the toll booth.
Crypto: The Decentralized Alternative That Hasn't Scaled
Crypto enthusiasts claim Bitcoin/Ethereum solve the payment rail problem: peer-to-peer, no intermediaries, censorship-resistant.
The reality (2026):
Why crypto hasn't replaced SWIFT/CIPS:
- Speed: Bitcoin settles in ~10 min, Ethereum ~15 sec. SWIFT is 1-3 days but reliable. For $millions, speed matters less than certainty.
- Volatility: BTC price swings 5-10% daily. Unusable for trade invoicing (imagine quoting a price that changes 10% before settlement).
- Regulation: Exchanges (Coinbase, Binance) are regulated, require KYC, comply with sanctions. "Censorship resistance" is theoretical—in practice, regulated on-ramps exist.
- Scale: Bitcoin processes ~7 transactions/second. Visa processes 65,000/sec. SWIFT coordinates millions of transactions daily. Crypto can't scale to global trade volumes.
- Liquidity: Converting $100M from BTC to USD moves markets significantly. For large trades, crypto lacks depth.
Where crypto IS used for sanctions evasion:
- Small-scale transactions (individuals, SMBs)
- Darknet markets (illicit goods)
- Limited state use (North Korea, Iran reportedly use crypto for some trade, but it's marginal)
Conclusion: Crypto is a niche alternative, not a replacement for SWIFT/CIPS. For major trade ($billions), you need traditional or state-backed rails.
Historical Parallel: Bretton Woods and Dollar Hegemony
THE SETUP:
Post-WWII, Allied powers met in Bretton Woods to design the global financial system.
The US held 70% of world's gold reserves. US emerged as sole undamaged major economy.
THE DEAL:
• Dollar pegged to gold ($35/ounce)
• Other currencies pegged to dollar
• IMF and World Bank created (US-dominated governance)
• Dollar became global reserve currency
THE OUTCOME:
Dollar hegemony for 80+ years. Even after gold peg ended (1971), dollar remained dominant:
• 60% of global FX reserves held in dollars
• 40%+ of SWIFT traffic dollar-denominated
• Oil priced in dollars (petrodollar system)
• International debt issued in dollars
THE PARALLEL:
Bretton Woods created financial infrastructure that embedded US power.
SWIFT/correspondent banking extended that infrastructure into the digital age.
Now: China building alternative (CIPS, yuan internationalization) to challenge dollar system.
THE PATTERN:
Infrastructure outlasts the conditions that created it.
Dollar dominance was built on 1944 economic reality (US =70% of gold).
That reality no longer exists (China = larger economy by some measures).
But the infrastructure remains—until alternatives scale up.
The Alternative Scenario: Payment Rail Fragmentation
TRIGGER:
Major US-China conflict (Taiwan, trade war escalation). US expands sanctions: any bank transacting with China faces secondary sanctions (cut from dollar system).
WEEK 1: THE IMPOSSIBLE CHOICE:
• Global banks face decision: access to US market OR access to China market
• Can't have both (secondary sanctions force choice)
• European, Asian banks split: some choose US, some choose China
• SWIFT becomes effectively "Western SWIFT" (China-aligned banks exit or get cut)
MONTH 1: PARALLEL SYSTEMS EMERGE:
• SWIFT system (US/EU/allies)
• CIPS system (China/Russia/Belt & Road)
• Neutral zone (banks trying to operate in both, increasingly difficult)
• Trade bifurcates: Western companies can't easily pay Chinese suppliers
MONTH 3: TRADE DISRUPTION:
• Supply chains fragment (can't pay for goods across systems)
• Companies forced to choose sides (operate in West OR China, not both)
• Prices spike (efficiency losses from fragmented trade)
• Inflation accelerates globally
YEAR 1: NEW EQUILIBRIUM:
• Two incompatible financial systems
• Dollar zone (SWIFT, correspondent banking, Western rails)
• Yuan zone (CIPS, direct swaps, China-centric rails)
• Trade between zones drops 60-70%
• Global GDP contracts 5-10% (efficiency losses)
YEAR 5: CALCIFIED DIVISION:
• New generation of businesses operates in one zone only
• Financial infrastructure incompatible by design
• Reunification politically and technically difficult
• The "global economy" is now two regional economies
THE LESSON:
Payment rail fragmentation doesn't require war.
Just requires US to overuse sanctions weapon + China to provide credible alternative.
Both conditions already exist. Only question: what triggers full split?
Conclusion: The Pipes That Move Money
Payment rails are the most weaponized infrastructure layer we've mapped.
Undersea cables (Part 1) can be cut, but traffic reroutes. Satellites (Part 2) can be shot, but debris limits escalation. DNS (Part 3) can fragment, but regional internets function.
Payment rails are different. Cut from SWIFT/correspondent banking, and you can't transact internationally. Period. There's no easy workaround without alternative infrastructure.
For 50 years, SWIFT and the dollar system had no real alternative. US sanctions were the nuclear option. But China built CIPS specifically to escape that vulnerability.
Now (2026): CIPS processes $12+ trillion/year and growing 40-50% annually. Russia, Iran, Belt & Road countries are adopting it. The sanctions weapon is losing effectiveness because the target can route around it.
The pattern is clear: every layer of digital infrastructure is fragmenting into Western vs. China-aligned systems. Payment rails are just the most visible because sanctions make the split explicit.
Money doesn't flow freely. It flows through rails you can turn off. And the world is building two sets of rails.
Next: Part 5 - The Cloud Is Someone's Computer (Where does your data actually live? And who can access it?)
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