The growing weaponization of the US dollar and the international payment system known as SWIFT has triggered a profound shift in global commerce. As trust in the greenback and its associated financial networks wanes among nations facing economic pressure, policymakers and financial leaders are increasingly looking for viable alternatives. This search for insulation against unilateral financial measures has brought alternative settlement mechanisms, local currencies, and traditional assets to the forefront of international trade discussions.
In response to these mounting geopolitical and economic tensions, Turkish President Recep Tayyip Erdogan has strongly advocated for the broader adoption of Islamic finance principles. Emphasizing the pressing nature of the situation, President Erdogan noted that trading in national currencies has gained significant urgency, urging the international community to place the issue of Islamic finance firmly on the global economic agenda.
President Erdogan has previously called upon other countries to work collectively to end what he termed the "monopoly" of the dollar in global trade transactions. This sentiment has not gone unnoticed in Western financial capitals. Former US Treasury Secretary Steve Mnuchin publicly acknowledged the risks associated with these shifting global attitudes, warning that if authorities are not careful, international actors will increasingly look at utilizing alternative currencies and payment channels to conduct their business.
Iranian Banks Removed from SWIFT
The urgency behind these alternative financial arrangements stems largely from the aggressive application of economic sanctions. US sanctions have resulted in the systematic removal of Iranian banks from the SWIFT international payment system, effectively crippling Iran’s ability to conduct standard foreign trade and participate fully in the global economy. Similar extraterritorial sanctions have also created substantial hurdles for European entities, impacting firms involved in collaborative energy infrastructure projects, such as the Russian-German pipeline.
Faced with exclusion from Western-dominated financial networks, major economic powers have begun forging independent pathways. Russia and China, both frequent targets of Western trade restrictions, have established their own bilateral payment systems. These mechanisms allow Moscow and Beijing to trade directly with one another, completely circumventing the need for the US dollar and mitigating the risks posed by third-party financial blockades.
Increased Use of Gold and Local Currencies
The movement away from the dollar extends well beyond bilateral arrangements between Moscow and Beijing. The eight-nation Shanghai Cooperation Organization (SCO)—which includes major regional economies such as China, Pakistan, and Russia—collectively represents nearly a quarter of global Gross Domestic Product. Member states of the SCO have steadily increased their collective gold and foreign exchange reserves, which now amount to nearly $4 trillion USD.
Recognizing their combined economic weight and shared vulnerability to external currency fluctuations, the SCO held a finance ministers’ meeting in Moscow where a decisive strategic choice was made. The organization resolved to conduct future bilateral trade and investment activities using local currencies rather than relying on the US dollar, signaling a structural shift in regional economic integration.
Use of Gold in Islamic Cultures
Parallel to the de-dollarization efforts led by regional economic blocs, traditional assets are experiencing a resurgence, particularly in Asian and Middle Eastern markets. Gold has long remained an attractive asset class and a trusted store of wealth, traditionally passed down through generations in many Asian cultures. Within this context, Turkey and Malaysia have positioned themselves at the forefront of Islamic financial gold banking and the development of gold-backed currency systems.
Practical implementations of these concepts are already visible at regional levels. The Malaysian states of Kelantan and Perak introduced gold dinar and silver dirham coins to serve as an alternative means of payment and commercial exchange. Meanwhile, in the Turkish banking sector, institutions such as Kuveyt Türk—a prominent Islamic bank—began offering specialized gold banking services in 2007. By July 2019, the bank had successfully collected over 26 tons of gold, valued at approximately $1.2 billion, integrating these traditional reserves directly into the broader Turkish economy. Current initiatives in these regions even include exploring Islamic finance gold-based cryptocurrencies to better facilitate secure and efficient cross-border trade without relying on Western correspondent banking networks.
Islamic Finance Gold Standard
The integration of precious metals into modern Islamic financial frameworks received a major institutional boost in 2016. The World Gold Council, working alongside the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), officially approved a comprehensive sharia standard for gold-based products.
The primary objective of this regulatory milestone was to safely increase the utilization of physical bullion within Islamic finance and pave the way for the creation of innovative financial instruments. The established standard meticulously addressed critical operational parameters, including the proper use of collateral, as well as the rules governing the exchange of gold in both spot and deferred financial transactions. By establishing clear religious and commercial guidelines, this standard has provided the necessary regulatory foundation for nations and financial institutions seeking to expand gold-based trade and investment mechanisms.