The growing trend of utilizing the United States dollar and the SWIFT international payment architecture as instruments of geopolitical leverage has catalyzed a profound shift in global commerce. As international trust in the greenback and its associated financial networks wanes due to aggressive economic sanctions, nations across the globe are actively seeking viable alternatives to insulate their economies and maintain fluid cross-border trade.
This widespread apprehension regarding the centralization of the global financial system has placed alternative payment mechanisms, particularly Islamic finance instruments and national currency settlements, at the forefront of international economic strategy.
Islamic Finance Instruments Can Replace US Dollar in Trade
In direct response to the weaponization of traditional payment systems, Turkish President Recep Tayyip Erdogan has emerged as a vocal advocate for systemic change, urging nations to pivot toward Islamic finance principles and localized economic cooperation. Highlighting the pressing nature of the current economic environment, President Erdogan noted that trade in national currencies has gained urgency, asserting that the international community should prioritize placing the issue of Islamic finance firmly on the global agenda.
The Turkish leader has previously called on emerging economies and strategic partners to dismantle the long-standing monopoly of the dollar in global trade transactions. This sentiment of caution regarding the over-reliance on American financial hegemony is not entirely lost within Western corridors of power. Former US Treasury Secretary Steve Mnuchin previously acknowledged the inherent risks of aggressive financial policies, conceding that if policymakers are not careful, international actors will actively look at utilizing alternative currencies and payment frameworks.
Iranian Banks Removed from SWIFT
The urgency behind these alternative financial frameworks stems largely from concrete geopolitical actions that have disrupted traditional trade routes. The implementation of stringent United States sanctions has resulted in the systematic removal of Iranian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. This decisive action has severely crippled Iran’s capacity to conduct normal foreign trade and engage with international markets.
Similar extraterritorial economic pressures have not been limited to the Middle East. Comparable sanctions have directly impacted European enterprises, notably affecting German firms that were actively working on the construction of the major Russian-German energy pipeline.
Faced with the constant threat of exclusion from Western-dominated financial infrastructure, major economic powers have begun establishing independent channels. Notably, Russia and China have successfully set up their own bilateral payment systems, allowing them to trade directly with each other and completely bypass the use of the US dollar.
Increased Use of Gold and Local Currencies
The movement away from the greenback has expanded beyond isolated bilateral agreements into major multilateral coalitions. The Shanghai Cooperation Organization (SCO), an eight-nation member bloc that includes economic heavyweights such as China, Pakistan, and Russia, currently represents nearly a quarter of global Gross Domestic Product (GDP).
Member states of the SCO have methodically increased their collective gold and foreign exchange reserves, which now stand at an impressive total of nearly four trillion US dollars. This robust financial foundation has empowered the bloc to take decisive action regarding its internal economic policies. During a high-level finance ministers meeting held in Moscow, the SCO officially reached a landmark decision to conduct bilateral trade and investment entirely in local currencies, effectively sidelining the dollar for a significant portion of regional commerce.
Use of Gold in Islamic Cultures
Parallel to the de-dollarization efforts led by state coalitions, tangible assets such as gold have re-emerged as highly attractive asset classes and reliable stores of wealth. This reliance on bullion is deeply rooted in traditions passed down through generations across Asian cultures. Within this landscape, Turkey and Malaysia have positioned themselves at the forefront of Islamic financial gold banking and the development of gold-backed currency systems.
In Malaysia, the state governments of Kelantan and Perak took innovative steps by introducing the gold dinar and silver dirham coins as alternative mediums of payment and localized trade. Meanwhile, in the Turkish banking sector, institutions such as Kuveyt Türk began pioneering gold banking initiatives as early as 2007. By July 2019, the bank had successfully collected over 26 tons of gold—valued at approximately $1.2 billion—seamlessly integrating these physical bullion assets into the broader Turkish economy.
Current technological and financial initiatives in the region are expanding upon these foundations, exploring the creation of Islamic finance, gold-based cryptocurrencies designed to better facilitate secure and efficient cross-border trade without relying on Western banking networks.
Islamic Finance Gold Standard
The credibility and institutional backing of these gold-oriented financial instruments reached a significant milestone in 2016. During that year, the World Gold Council, in collaboration with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), officially approved comprehensive sharia standards for gold-based financial products.
The primary objective of establishing this formal standard was to systematically increase the utilization of physical bullion within Islamic finance and to encourage the creation of innovative financial instruments that comply with religious jurisprudence while meeting modern commercial needs. The newly established standard successfully addressed complex transactional elements, including the proper use of collateral, as well as the parameters governing the exchange of gold in both spot and deferred transactions.