The growing weaponization of the US dollar and the international payment messaging system administered by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) has triggered a profound shift in global commerce. As trust steadily wanes in the greenback and the Western-dominated financial infrastructure that supports it, a diverse coalition of nations is actively seeking viable alternatives to conduct international trade, safeguard their economies, and insulate themselves from unilateral economic sanctions.
This sentiment has found a prominent voice in Turkish President Recep Tayyip Erdogan, who has strongly advocated for the broader adoption of Islamic finance principles and the expansion of trade settled in national currencies. Speaking on the urgency of these financial shifts, President Erdogan emphasized that trade in national currencies has transitioned from a theoretical discussion to an immediate necessity. He noted that the international community must place the development and application of Islamic finance instruments firmly on the global economic agenda.
President Erdogan has a history of calling out what he characterizes as the absolute monopoly of the dollar in international commerce. His concerns are shared by key financial figures in the West. Former US Treasury Secretary Steve Mnuchin previously acknowledged the inherent risks of overusing financial sanctions, warning that if policymakers are not careful, international actors will deliberately look for ways to use other currencies and alternative payment networks to bypass the American financial system.
Iranian Banks Removed from SWIFT
The catalyst for many of these defensive economic maneuvers lies in the aggressive deployment of economic sanctions by the United States. Most notably, the sweeping deployment of US sanctions has resulted in the removal of Iranian banks from the SWIFT payment system, severely crippling the nation’s ability to conduct routine foreign trade and access international financial markets. This high-profile exclusion demonstrated to other nations that reliance on Western-centric financial networks exposes sovereign states to significant economic disruption at the stroke of a pen.
The impact of these policies has extended far beyond traditional adversaries of the United States. Similar secondary sanctions and regulatory pressures have directly impacted European firms, including companies working on the strategic Russian-German energy pipeline project, causing widespread diplomatic friction and economic recalibration among traditional allies.
Faced with the prospect of being cut off from Western financial rails, major global powers have begun constructing parallel systems. Most notably, Russia and China have established their own independent financial messaging and payment mechanisms to facilitate bilateral trade directly with each other, effectively shielding their transactions from the reach of the US dollar and American regulatory oversight.
Increased Use of Gold and Local Currencies
Parallel to these bilateral arrangements, broader multilateral coalitions are reducing their exposure to Western currencies. The Shanghai Cooperation Organization (SCO), an influential eight-nation security and economic bloc that includes major global players such as China, Pakistan, and Russia, currently represents nearly a quarter of the global Gross Domestic Product.
Over recent years, member states of the SCO have aggressively increased their sovereign gold holdings and foreign exchange reserves, which now collectively amount to nearly four trillion US dollars. This massive war chest provides a powerful economic buffer against external financial shocks. Capitalizing on this financial strength, the SCO convened a finance ministers meeting in Moscow where member nations formally decided to conduct future bilateral trade and investment using local currencies rather than routing transactions through the US dollar.
This strategic pivot toward local currencies allows emerging economies to reduce exchange rate volatility, lower transaction costs, and maintain greater monetary sovereignty within their respective regions.
Use of Gold in Islamic Cultures
In tandem with the push for local currency settlements, precious metals—particularly gold—have re-emerged as an attractive asset class and a trusted store of wealth. This reliance on tangible assets is deeply rooted in traditional Asian and Middle Eastern cultures, where gold has served as a generational safeguard against fiat currency devaluation.
Among modern nation-states, Turkey and Malaysia have positioned themselves at the forefront of Islamic financial gold banking and the development of gold-based currencies. In Malaysia, local state governments have taken tangible steps to operationalize these concepts. The state governments of Kelantan and Perak introduced the gold dinar and silver dirham coins as complementary means of payment and mediums for trade, reviving historical monetary models within modern economic frameworks.
Meanwhile, Turkey has integrated gold directly into its banking and financial sectors through pioneering institutions. Kuveyt Türk, an Islamic bank operating in Turkey, launched dedicated gold banking services in 2007. By July 2019, the institution had successfully collected over 26 tons of physical gold, valued at approximately 1.2 billion US dollars, integrating these bullion assets smoothly into the broader Turkish economy.
Building upon these physical banking successes, current financial initiatives are exploring the creation of Islamic finance gold-based cryptocurrencies. These digital assets are designed to leverage blockchain technology to better facilitate secure, transparent, and efficient cross-border trade without relying on traditional correspondent banking networks.
Islamic Finance Gold Standard
The formalization of these alternative financial instruments received a significant regulatory boost in 2016. During that year, the World Gold Council and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) jointly approved a comprehensive sharia standard specifically for gold-based financial products.
The primary objective of this standardized framework was to increase the utilization of physical bullion within Islamic finance and pave the way for the creation of innovative, sharia-compliant financial instruments. The newly established standard successfully addressed complex regulatory questions regarding the use of gold as collateral, as well as the technical execution of gold exchanges in both spot and deferred financial transactions. By establishing clear, internationally recognized guidelines, the standard has provided the necessary legal and religious certainty for financial institutions, governments, and commercial enterprises to expand gold-backed trade solutions across the global Islamic finance sector.