Payments Politics: Cross-Border Systems in a Fragmenting World

Cross-border payments are no longer defined solely by cost and speed, and the intertwining of payments and politics will not be undone quickly. This report explores how next-generation cross-border payment systems can build resilience through self-reliance, domestic real-time rails, and cross-border solutions built around corridors of real demand, rather than from the top down.

• Next-generation payments must be designed to withstand shocks that can arise from anywhere. A perception that the US is abusing its financial leverage can accelerate the very diversification it means to punish. 
• Swap lines and offshore clearing support large banks and corporates, while cross-border real-time payment systems benefit individuals and small- and medium-sized enterprises. Both are needed for effective and inclusive payment systems.
• Many stablecoins have centralized chokepoints. Where they both concentrate exposure to the USD and diversify the pathways for currency flight, economies could realize the worst of both approaches.
• Even efficiency-first rails can contribute to resilience. Countries should not rely on their richer or larger peers to build payment rails on their behalf.