Geopolitics underpin race for cross-border payment innovations

Elettra Ardissino elettra.ardissino@ft.com · 1 Aug 2025

The Trump administration has helped usher stablecoins into the financial mainstream as a way of making payments between individual users. Behind the scenes, the starting gun has also sounded on projects to innovate cross-border wholesale payments.

The issue may be technical but the potential stakes are geopolitical. Currently, the vast majority of crossborder payments are enabled by western technology or currencies, giving the US and its allies disproportionate power to sanction adversaries. For some countries, the chance to reshape that architecture is very valuable indeed.

Most cross-border payments happen through the correspondent banking network. This can be slow and expensive — especially for transactions that involve far-flung countries or infrequently traded currencies.

To receive international payments, a local bank needs to hold an account at a foreign bank that is located in the jurisdiction where the payment is made. If the local bank has no such relationship abroad, the payment has to go through third-party banks.

This system creates all sorts of complications. Less liquid currencies can suffer from poor exchange rates. Settlement can be delayed by misaligned time zones or bank holidays.

Each jurisdiction that the transaction passes through conducts its own money laundering and know-your-customer checks. But this clunky set-up also gives the west a formidable geopolitical tool.

Swift, the system that most banks use to message cross-border payment instructions, operates under Belgian law, is subject to EU regulations and has in the past been amenable to US influence.

Monetary authorities have sought to make incremental improvements to the current set-up. In 2020, the Financial Stability Board developed an action plan with this aim.

But new technologies such as distributed ledgers and tokenisation are now giving policymakers the chance to reimagine the system on a fundamental level.

The Bank for International Settlements — the Basel-based umbrella body for central banks — has backed many projects with this aim.

The longtime frontrunner was mBridge. With the participation of the central banks of China, Thailand, Hong Kong, the United Arab Emirates and later Saudi Arabia, it sought to develop a platform for instant cross-border payments using wholesale central bank digital currencies and distributed ledger technology. Cross-border payments on mBridge bypass Swift and the dollar.

But in October 2024, the BIS announced that it would pull out of the project. Agustín Carstens, then BIS general manager, denied that geopolitical considerations were at the heart of its decision to withdraw — although many analysts suspect otherwise.

Today, mBridge is in the hands of its five participating central banks.

The BIS has instead thrown its weight behind Project Agorá, which brings together seven mostly western central banks including the Federal Reserve Bank of New York, the Banque de France (representing the Eurosystem), the Bank of Japan and the Bank of England, as well as 43 financial institutions.

Project Agorá is not seeking to create an alternative to the correspondent banking system. It aims to give it a major upgrade by exploring the use of tokenised commercial and central bank money.

Through tokenisation, the settlement function of cross-border payments could be bundled together with messaging. Transactions could be recorded on a unified ledger that would be updated synchronously, subject to money laundering and know-your-customer checks.

For now, mBridge is running ahead of Agorá. While both projects are still only experimental, mBridge first ran pilots of real-world transactions as far back as 2022. Agorá, by contrast, is still building a prototype platform.

In trying to upgrade the system, western central banks also face unique challenges. Call it the incumbent’s dilemma — advanced economies’ financial architecture is very complex and may prove challenging to align in a new system.

So if Agorá faces all these obstacles, what are its strengths? The big one is that it includes the dollar, the most traded currency.

“The US government wants Project Agorá to succeed in order to counter China’s ability to evade sanctions in the future,” said Josh Lipsky, senior director for geoeconomics at the Atlantic Council. “In a world in which nonaligned countries will have to choose whether to sign up to mBridge or an Agorá-inspired platform, the US dollar’s presence will be a powerful incentive to choose the latter.”