SWIFT Vs CIPS - Rise of China's Digital Silk Road

As we have stated earlier, the nature of warfare is constantly evolving. Conventional warfare is not only too expensive, but it brings with it possibilities of economic and diplomatic isolation and damage. We will see more instances of cyber warfare, propaganda, disinformation, false flag operations, etc. in the future. These are effective ways to create damage. However, when it comes to truly bringing a nation to its knees, nothing can be more effective than economic warfare. The US discovered this decade back when the Gulf countries imposed an embargo in the wake of the Arab-Israeli War leading to the birth of the Petrodollar under the stewardship of Dr. Henry Kissinger. The Petrodollar has ensured that the GCC countries are unable to weaponize Oil. The mounting US deficits and Saudi Arabia’s vast US Security holdings have made it possible for the Kingdom to threaten a dump of $750 billion US Securities if the US Congress declassify 9/11 documents linking Saudi involvement.

The US’s saviour during the Oil Embargo of 1973-74 was Iran, who ironically has been the victim of severe US Sanctions for a long time until the 2015 Iran Nuclear Deal. The US Sanctions and freezing of Iranian accounts and its inability to transact in the US dollar was made possible by SWIFT, a front of the Washington Consensus. SWIFT stands for the “Society for Worldwide Interbank Financial Telecommunications”. It is a messaging network that financial institutions use to transmit information and instructions securely through a standardised system of codes. SWIFT system came into existence in 1973. Seven major international banks formed a cooperative society to operate a global network that would transfer financial messages in a secure and timely manner. Iran re-entered SWIFT system in February 2016. As things stand currently, Iran has yet to reap the windfalls of its arrivals on the international scene and several countries are still circumspect about the possibility of future sanctions and of course Iran’s history of “irresponsible” nuclear behaviour does not help.

The case of secret cooperation between the US government and SWIFT came into limelight in 2006 after a Belgian commission accused SWIFT of secretly supplying US authorities with massive amounts of personal data for use in anti-terror investigations, violating EU privacy rules. The US could play the role of big brother/international bully as long as there was no challenger. The rise of China and its increasing global clout is systemically shaking things up. China, another communist country like the US’s other bête noire Russia does not have an obedient gene in its DNA and is unwilling to accept the status quo set up by the US via its Washington Consensus. In a sign of things to come, China has already launched it's Yuan linked gold rate and is working towards setting up a completely parallel geopolitical and geo-economic system via AIIB, OBOR, etc.

China has been calling for de-dollarization for a while now. In 2015, China launched its alternative to the SWIFT called the China International Payment System (CIPS) to facilitate cross-border transactions in the Yuan at a much cheaper cost. Needless to say, Russia, reeling under UN Sanctions has already stated it could join the CIPS. Other nations that are US/NATO/EU enemies will also find this system very appealing. The Yuan’s entry in SDR will force central banks to increase their Yuan holdings, and the CIPS is very conveniently placed to take advantage of it.

Iran’s Chabahar Project with India has the potential to become a game-changer for Iran and India. However, Iran’s gain is bound to be the loss of GCC countries. It should come as no surprise that post India and Iran’s signing of Chabahar; voices can be heard asking if this deal is flouting any international norms as Iran’s sanctions are being gradually phased out. The Chabahar Port is crucial for trade with Central Asia, Afghanistan, Russia and eventually Europe. If the US continues to play spoilsport, the day may not be far when Iran joins the CIPS and rejects SWIFT. China is also expected to launch its Yuan-denominated Crude Oil futures contract in 2016 to compete with the London Brent and US WTI. With Iran controlling such a huge amount of trade and countries like Iran, Russia and perhaps even CIS nations (in the future) adopting CIPS, what would the impact of any UN Sanctions really be? More importantly, where will this leave SWIFT?

In an interesting turn of events, Goldman Sachs, the “official” US Govt banker filed a SETLcoin Patent in December 2015 for cryptographic currency for securities settlement. Goldman has reasoned this with the time loss due to SWIFT’s minimum three working days settlement of international transactions and expensive norms. It has further stated that SETLcoin will facilitate the exchange of assets much quicker, efficiently and securely and also work for transactions between virtual and non-virtual wallets. JP Morgan, Barclays, Commonwealth Bank of Australia, State Street, RBS, BBVA, UBS and Credit Suisse are also backing the bitcoin or blockchain network advocated by Goldman Sachs. For SWIFT, this is the beginning of the end. Though it is arguing that it is best placed to facilitate blockchain technology on its vast existing networks, recent hacks of central banks are showing SWIFT as a defunct system that must go. In the recent past, cyber criminals have breached SWIFT security systems multiple times and have stolen more than $150 million from various banks across the globe. The biggest theft took place in February 2016 when these cyber criminals once again breached into SWIFT security systems this time in the Bangladesh Bank account at the Federal Reserve Bank of New York stealing $101 million. Interestingly, most of these attacks took place during 2015-16.

In what could be the final nail in the coffin, Goldman Sachs, and China-based IDG Capital Partners led a $50 million investment into Circle Internet Financial Limited, a bitcoin start up on using technology to improve consumer payments in 2015. As global realignments take place, prominent players in the current ecosystem fight to stay relevant. Some of these players will be able to fight for their place in the sun, and some will fade away into the sunset. Will SWIFT become a victim of the fight for supremacy between the Beijing consensus vs Washington consensus? It will be interesting to see how things pan out for SWIFT?

China’s Digital Silk Road

China’s Digital Silk Road represents one of the most ambitious and multifaceted strategies of the 21st century, marrying traditional geopolitical ambitions with cutting-edge digital infrastructure. It is not merely a technological outreach program, but a decisive move to reshape the global digital economy, build cyber-sovereignty, and shift the balance of financial power away from the Western-dominated order. At the heart of this initiative is the desire to create a new digital ecosystem that runs parallel to, and in many cases competes with, existing Western systems. This includes the development and export of advanced telecommunications, artificial intelligence, satellite navigation systems, blockchain infrastructure, and most significantly, the deployment of a sovereign digital currency the digital yuan. In doing so, China is crafting a digital corridor that complements its physical Belt and Road Initiative, extending its strategic footprint across continents through fiber optic cables, data centers, e-commerce platforms, and alternative payment systems.

The Digital Silk Road was first officially introduced in 2015 as a subcomponent of the Belt and Road Initiative (BRI), which has seen China invest over $1 trillion in infrastructure projects spanning Asia, Africa, and Europe. While the BRI initially focused on roads, ports, and railways, the Digital Silk Road emerged as an essential evolution of that vision positioning digital infrastructure as a parallel enabler of global connectivity and control. This initiative gained greater momentum during the COVID-19 pandemic, as digital platforms became the backbone of economic and social life, highlighting the strategic necessity of digital infrastructure for national and international resilience. By 2023, China had signed digital cooperation agreements with more than 17 BRI countries and had established over 35 cross-border fiber optic cables linking itself with its partners, cementing its role as a digital infrastructure provider for the developing world.

A central element of China’s Digital Silk Road is the digital yuan, or e-CNY, a central bank digital currency (CBDC) issued by the People’s Bank of China (PBOC). The digital yuan is a landmark in global monetary evolution, being the world’s most advanced large-scale deployment of a CBDC to date. China began its first real-world trials of the digital yuan in 2020 in cities such as Shenzhen, Suzhou, and Chengdu. As of late 2024, the e-CNY has facilitated transactions exceeding 2.2 trillion yuan, approximately $300 billion, across over 260 million individual wallets. These figures are not merely a technological triumph but a geopolitical statement. Unlike Bitcoin or Ethereum, which are decentralized, the digital yuan is centralized, programmable, and fully traceable, giving the Chinese government unparalleled oversight of financial activity. It is designed not just for domestic efficiency but also for cross-border trade, especially with BRI partner nations that may lack robust domestic payment infrastructure.

To reduce dependence on the U.S.-controlled SWIFT system, which handles the vast majority of international financial messaging, China developed the Cross-Border Interbank Payment System (CIPS). Launched in 2015, CIPS functions as China’s answer to SWIFT and is designed to settle international renminbi transactions more efficiently. While CIPS is still a fraction of SWIFT in terms of transaction volume, it is growing rapidly. As of 2024, over 1,400 financial institutions in more than 110 countries use or are connected to CIPS, and daily settlement volumes often exceed 300 billion yuan. Moreover, CIPS is increasingly being integrated with the digital yuan, forming a closed-loop alternative to Western financial infrastructure. This combination of CIPS and e-CNY could allow China to conduct cross-border payments without touching the dollar-based financial system, circumventing sanctions and capital controls.

Blockchain technology also plays a critical role in the Digital Silk Road. China is the world’s largest state sponsor of blockchain innovation, and this commitment was made clear when President Xi Jinping declared blockchain a national priority in 2019. Since then, the government has supported the creation of the Blockchain-based Service Network (BSN), an ambitious initiative to build a standardized global blockchain infrastructure. The BSN aims to lower the barriers to blockchain adoption by allowing developers to create decentralized applications across various protocols while remaining compliant with Chinese regulatory frameworks. By early 2025, BSN had nodes in over 20 countries, including several BRI members, and supported more than 30 different blockchain protocols. This provides China with both technological leadership and an ideological export tool—a way to introduce blockchain technologies that are inherently more controllable and censorable than the libertarian versions originating in the West.

China’s foray into digital payments also extends beyond its borders via platforms like Alipay and WeChat Pay, which have become ubiquitous across Southeast Asia and parts of Africa. These platforms provide a soft-entry point into the Chinese financial ecosystem, bringing foreign users into a framework that is ultimately beholden to Beijing’s regulatory and surveillance standards. The expansion of UnionPay, China’s answer to Visa and Mastercard, is also a part of this broader strategy. As of 2024, UnionPay is accepted in 181 countries and regions and has issued over 200 million cards outside mainland China. When combined with China’s push for the internationalization of the renminbi and the deployment of e-CNY wallets abroad, these moves create a financial and technological sphere of influence that mirrors the geopolitical aspirations of the Belt and Road.

From a technical standpoint, China’s blockchain-based digital infrastructure is designed to enhance efficiency, reduce transaction costs, and provide auditability. These benefits are particularly appealing to countries with high levels of corruption, weak banking institutions, or heavy reliance on remittances. In Kenya, for instance, a pilot program using BSN-enabled smart contracts is being tested to streamline government-to-person payments and reduce graft. In Laos, the e-CNY is being piloted for use in cross-border trade settlements, as the country becomes increasingly indebted to China under BRI-linked infrastructure projects. In Pakistan, Huawei has been instrumental in laying the groundwork for a “safe city” project that combines facial recognition, AI surveillance, and 5G connectivity a project that is as much about security as it is about technology. These are not isolated examples; they represent a pattern of digital vassalage, where the recipient nations become reliant on Chinese technology stacks and standards, subtly realigning their strategic loyalties.

By the end of 2024, more than 1.2 trillion U.S. dollars in cross-border payments had been processed using the digital RMB, marking a nearly 180 percent increase year-on-year from 2023. The rapid growth is not only a technological milestone but a strategic one. In contrast to speculative crypto assets, China’s digital currency is tightly regulated and fully sovereign-backed, offering both stability and control—an enticing proposition for countries looking to de-risk from U.S.-centric financial infrastructure. The digital RMB now serves not just as a payment mechanism but as the digital bedrock of China's broader economic statecraft.

This pivot toward a Chinese-centric digital ecosystem is causing concern in the West, particularly in the United States and the European Union. The fear is not just about espionage or technological dominance but about the erosion of dollar supremacy. The dollar’s role as the world’s reserve currency gives the United States unique privileges, including the ability to impose sanctions with devastating effect. By promoting the e-CNY and CIPS, and by exporting digital infrastructure that bypasses U.S. oversight, China is gradually building an alternative financial universe. If successful, this could fragment the global monetary system into competing blocs one anchored in Washington, and the other in Beijing.

China’s ambitions also extend to cyberspace governance. Through forums such as the World Internet Conference in Wuzhen and digital cooperation deals signed with dozens of developing countries, Beijing advocates for a vision of “cyber sovereignty.” This means each country should have the right to govern its own internet without interference code for a more closed, state-monitored, and censorship-friendly digital space. While this contrasts sharply with the Western ideal of an open internet, it appeals to authoritarian regimes and fragile democracies alike, who see in China’s model both a technological roadmap and a political ideology. This convergence of interests creates a powerful coalition of the digitally aligned a new axis of cyber governance that rivals the liberal norms promoted by Silicon Valley.

Despite its rapid progress, the Digital Silk Road is not without challenges. Technological trust remains a major hurdle. Western nations have raised concerns over the security implications of using Chinese telecom equipment and software, leading to restrictions on companies like Huawei and ZTE. Even among BRI countries, there is an undercurrent of unease about over-reliance on Chinese infrastructure and the potential for digital colonialism. Moreover, the global backlash against surveillance capitalism and authoritarian control has spurred civil society groups to demand greater transparency in Chinese digital projects abroad. Finally, the digital yuan’s uptake outside China remains limited, in part because it lacks the liquidity and legal protections offered by established currencies like the dollar or euro.

Yet these challenges are unlikely to derail Beijing’s digital ambitions. The scale of investment, the coherence of strategy, and the alignment between technological and geopolitical goals make the Digital Silk Road one of the most consequential projects of our time. Whether it is the integration of blockchain into trade finance, the rise of e-CNY in regional settlements, or the build-out of alternative financial rails like CIPS, China is reengineering the architecture of the global economy from the ground up. As this digital corridor grows, it will force other nations to make hard choices about technological alignment, data sovereignty, and financial allegiance.

Nowhere is this convergence of technology and strategy more visible than in the Belt and Road Initiative (BRI), China’s flagship global infrastructure program. The “Digital Silk Road,” an extension of the BRI, aims to embed digital infrastructure—including 5G, data centers, and digital currency systems—into partner countries across Asia, Africa, Europe, and the Middle East. Projects like the China-Laos Railway and the Jakarta-Bandung High-Speed Railway already use digital RMB to settle supplier contracts, employee payroll, and materials procurement. Transactions are secured through China’s Beidou satellite navigation system and, in high-priority zones, reinforced through quantum-encrypted communications. By 2024, more than $300 billion worth of BRI-related contracts had been settled using digital RMB, up from just $35 billion three years earlier.

This has posed a direct challenge to SWIFT, which, despite its global reach, is increasingly viewed as an instrument of U.S. financial hegemony. Following the imposition of SWIFT-based sanctions on countries like Iran and Russia, many nations have sought alternative systems to avoid being caught in geopolitical crossfire. China’s Cross-Border Interbank Payment System (CIPS), launched in 2015, was initially seen as a complementary tool to SWIFT. However, its evolution into a full-service RMB clearing and settlement network has enabled it to process over 96 trillion yuan (about $13.4 trillion) in transactions as of 2024, representing a tenfold increase from its early years. Unlike SWIFT, which merely transmits messaging, CIPS handles the actual clearing and settlement of funds, giving it a distinct edge in a world that prizes speed, sovereignty, and security.

This vision is advancing rapidly. The digital yuan wallet app, developed by the PBOC, now has over 410 million registered users within China and supports integration with international remittance services. Cross-border pilot zones in Hong Kong, Macau, and Shenzhen processed nearly $40 billion in transactions in 2024. And with China’s tech giants like Huawei, Tencent, and Alibaba now developing blockchain hardware, smart POS terminals, and secure payment chips, the entire payments stack is moving toward autonomy from Western systems. The scale, speed, and coordination with which China has executed this shift is unparalleled in monetary history.

China's push to internationalize the digital yuan has gained considerable traction in the Middle East and Asia, particularly as regional economies seek alternatives to the U.S. dollar for trade settlement. In the Middle East, where China is the largest importer of oil, energy-exporting nations have increasingly shown interest in settling transactions in the digital yuan. In 2023, bilateral trade between China and Saudi Arabia reached $116 billion, with over 85% of it involving crude oil exports to China. While most of this trade still settles in dollars, discussions between Chinese and Saudi officials have intensified around the potential use of the e-CNY, especially following Riyadh's inclusion in the Shanghai Cooperation Organization as a dialogue partner.

The People's Bank of China (PBoC), through the m-CBDC Bridge initiative—a joint project involving the central banks of the UAE, Thailand, and Hong Kong—has conducted over 160 cross-border transactions worth more than $22 million as of early 2024, testing the digital yuan’s viability in real-time interbank transfers. The UAE has already integrated Chinese blockchain infrastructure into some of its financial systems, and pilot programs are underway to allow for digital yuan-denominated trade with Chinese state-owned enterprises operating in the Gulf. If even 5% of China’s $250 billion annual oil imports from the Gulf Cooperation Council (GCC) countries transition to e-CNY, it could represent a shift of over $12 billion annually out of the dollar-based system.

In Asia, the digital yuan is making deeper inroads in countries with strong trade, investment, and infrastructure ties to China. In Southeast Asia, the annual trade volume between China and ASEAN surpassed $970 billion in 2023, making ASEAN China’s largest trading partner. Several of these nations such as Laos, Cambodia, and Thailand are either participating in or aligning with China-led digital currency trials. Laos, which owes more than $13 billion in infrastructure debt to China under the Belt and Road Initiative, has begun limited pilot projects to settle bilateral trade invoices using the digital yuan, particularly in the energy and mining sectors. Cambodia’s Bakong digital payment platform, which processed over $15 billion in domestic and cross-border payments in 2023, has achieved technical interoperability with Chinese payment networks, including UnionPay and Alipay, paving the way for future integration with the e-CNY.

Meanwhile, in Thailand and Indonesia, central banks are collaborating with China via sandbox environments under the m-CBDC Bridge to explore multi-currency cross-border transactions. The Bank of Thailand reported successful settlements of over 6,000 transactions worth $12 million in early-stage pilots involving the e-CNY. These trials are laying the foundation for an alternative digital settlement ecosystem, where the digital yuan becomes an accepted medium of trade, investment, and remittance particularly in regions where China dominates supply chains and infrastructure development.

In our book “The Great Reset” (2022), we had already documented the rise of Digital Yuan along with use of CIPS payment settlement which is likely be deployed by China as part of Geo-Economic reset, to quote few paras from it as follows:

“The Chinese central bank launched CIPS (cross border interbank payment system) as an alternative to SWIFT (society for worldwide interbank financial telecommunication) with a view to internationalize its currency Yuan. In 2016 China started Asian Infrastructure Investment Bank (AIIB) with its headquarters in Shanghai and China being the majority shareholder in it”.

‘The third important component of the Geo Economic reset is the alternative bank messaging system CIPS. A lot of commentary has emanated that China’s CIPS (Cross Border Interbank Payment System) could be an alternative to SWIFT which is west run consortium from Belgium. In 2006 a Belgium commission accused SWIFT consortium of secretly supplying massive amount of personal data in ant-terror activities to the American intelligence CIA violating the EU privacy rules. CIA had analysed huge amount of data from SWIFT data centre in Culpeper, Virginia. After this scandal SWIFT was separated and the data generated in EU is processed and stored in the data centre in Netherlands and a new location at Switzerland. SWIFT since then has had a transatlantic and a European Asian zone”

“China is already in the midst of deploying Digital Yuan and thus as countries across the world develop digital currencies it will take them off the SWIFT network and also reduce the dollar trade. The Bank of International Settlement has outlaid that CBDCs could lead to adoption of common regulatory guidelines of digital currencies among G-20 countries however the disputes of West with Russia & China make that prospect of happening bit farfetched for now. While CBDCs may not be an immediate threat to the dollar dominance globally, it is providing the blueprint of a new monetary order in The New Global Order.”

The Digital Silk Road is far more than a subset of the Belt and Road Initiative. It is a new frontier in global power competition one that is fought not with tanks or tariffs, but with fiber optics, code, and cryptography. By fusing infrastructure with information control, and payments with politics, China is attempting to mold the digital order in its own image. The outcome of this effort will not only determine who controls the pipelines of global data and currency but will also shape the future of globalization itself. As the world becomes increasingly digitized, the contest between open and closed systems, between liberal and authoritarian models of technology, and between dollar hegemony and renminbi ascendancy will intensify. In this emerging order, the Digital Silk Road is both a symbol and a system a testament to China’s resolve to lead in the next era of globalization on its own terms.

The Western world must now reckon with a financial world where China is not just a participant but a rule-setter. The decision is not whether to compete, but how. Relying on the inertia of the dollar is no longer enough. China has demonstrated that sovereign-backed digital currencies, when integrated with smart infrastructure and blockchain rails, offer a viable and scalable alternative to the 20th-century financial model. The SWIFT-CIPS divergence is not merely technical it is civilizational.

In the long sweep of financial history, only a few moments define a true break from the past. The creation of the Bretton Woods system in 1944 and the launch of the Euro in 1999 are two such moments. The global rollout of China’s digital RMB is another. It may not come with formal treaties or public declarations, but its significance lies in the code, the contracts, and the quiet consensus forming among nations. The Digital Silk Road is not a blueprint it is already a highway. China is not just driving it is building the road, owning the toll booths, and defining the destination. And its willing to stop its juggernaut !

Notes:

1. China's Digital Silk Road in Southeast Asia - https://www.iseas.edu.sg/wp-content/uploads/2024/01/ISEAS_Perspective_2024_1.pdf?utm_source=chatgpt.com

2. Project mBridge Reaches Minimum Viable Product Stage - https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm?utm_source=chatgpt.com

3. Saudi-China Ties and Renminbi-Based Oil Trade - https://www.spglobal.com/en/research-insights/special-reports/saudi-china-ties-and-renminbi-based-oil-trade?utm_source=chatgpt.com

4. Digital Yuan's Role in Global Trade - https://www.proshare.co/articles/digital-yuan-the-new-era-of-cross-border-payments-in-global-trade?utm_source=chatgpt.com

5. Cambodia's Bakong QR Code Payment System - https://www.caixinglobal.com/2025-03-17/unionpay-partners-with-cambodia-thailand-to-make-payments-easier-102299227.html?utm_source=chatgpt.com

6. China's Digital RMB and the Global Financial Order - https://www.linkedin.com/pulse/silent-supernova-how-chinas-digital-rmb-rewriting-global-ravi-vs-yukmc/

7. Yuan's Role in Oil Trade and the Petrodollar - https://www.scmp.com/economy/global-economy/article/3295048/chinas-yuan-rise-oil-trade-petrodollar-here-stay-report?utm_source=chatgpt.com

8. Bakong: Cambodia's Next-Generation Mobile Payments and Banking - https://bakong.nbc.gov.kh/en/?utm_source=chatgpt.com