Sanctions Spark Global Financial Fragmentation

Countries are building alternative financial networks in response to sanctions, accelerating the fragmentation of the global payments system. This shift is driven by governments and large companies developing regulated channels for crypto use in cross-border trade.

Russia has been at the forefront of this trend, experimenting with crypto for foreign trade and expanding its digital ruble. Iran is using exchanges, stablecoins, and informal settlement networks to bypass sanctions. China is developing yuan-based payment infrastructure through CIPS (Cross-Border Interbank Payment System) and Project mBridge.

A7A5, a ruble-backed stablecoin, has processed over $93 billion in less than a year and is being used by businesses for operational expenditures. The digital ruble's value proposition outside of Russia is unclear. China's e-CNY (electronic Chinese yuan) can facilitate faster payments within the country and serve as a bridge to cross-border settlements.