Alternative Financial Systems and the Reshaping of Global Finance

Introduction and Background

Since the end of the Second World War, the global financial system has relied on the US dollar and the Western-dominated system of correspondent banks and broader financial infrastructure.

This has supported the democratisation of the financial system, underpinned the globalisation of trade and related financial flows and been a major contributor to the growth of the global economy. It has also enabled the development of internationally agreed standards via the Financial Action Task Force (FATF), the global anti-financial crime watchdog, that have significantly boosted the integrity of the financial system and supported the development of tools and procedures that allow countries to take action against those who abuse this system to launder the proceeds of crime, corruption and kleptocracy.

But the system has also faced challenges. Despite the availability of tools and procedures to protect the integrity of the system, those that seek to abuse it for personal gain or use its global reach to advance their malign intentions continue to operate. Actors behind terrorist attacks, democratic interference or laundering the proceeds of corruption have taken advantage of its open and global nature and of the varied implementation of the FATF's standards, to move their funds beyond the reach of pursuing authorities.

The longstanding nature of the financial system, dominated by the West, has also offered those at the centre of this system – primarily the US – a significant position of leverage. Chief among the tools of pressure is the deployment of financial sanctions that can be used to sever the access of individuals, companies or entire countries to the global financial system, thus threatening their economic security.

As the globalised nature of the financial system has enabled prosperity and supported efforts to increase its integrity, it has also induced a desire among increasingly prosperous nations to strive for greater financial independence and, more recently, to develop alternative financial systems (AFS) that reduce their reliance on the legacy system and its US dominance.

What was once a pipe dream is now – through the development of new clearing systems, central bank digital currencies, stablecoins and other forms of innovation – a reality. This effort to loosen the control of the Western-dominated system will also, of course, be welcomed by criminals, the corrupt and kleptocrats.

Furthermore, the rising use of sanctions and broader risk aversion brought on by increased regulatory scrutiny has driven the global banking community to reassess its international networks, withdrawing services from many parts of the world.

Against this background, in late June 2025 in London, the Centre for Finance and Security (CFS) at RUSI, with the support of the National Endowment for Democracy, convened 40 experts from the private sector, civil society and government for the first in a planned series of discussions to consider the development of AFS.

Methodology

This Insights Paper is based on the unattributable contributions of these experts and provides a framing for future engagements on this topic elsewhere in the world. Unless otherwise noted, statements made in this paper are based on points raised by participants at the roundtable.

Definitions and Scope

The workshop opened by asking participants to propose their definition and related scope for AFS. A general definition was proposed as financial systems that do not rely on traditional settlement and messaging systems, or ‘TradFi’; specifically, alternatives to SWIFT and the use of the formal banking system for cross-border payments. These alternatives might disrupt traditional policy and supervisory and law enforcement access.

Elaborating on this, one participant proposed that the concept could be applied across three different levels of activity:

1. The role of AFS in facilitating threat finance and organised crime, where alternatives to the formal financial system (such as cryptocurrencies, hawala and other forms of informal transfers of wealth) are used at an interpersonal level.
    
2. The use of AFS for global trade facilitation in favour of the US dollar, using a cross-section of methods, ranging from barter trade to stablecoins.
    
3. The possible role of AFS in the evolution of the nature of strategic reserves (that is, reducing the prevalence of US dollar-denominated assets in the asset portfolios held by central banks as part of their role to manage and secure national economies).

In short, this was summarised as ‘crime level, trade level and for national reserves’, although it was agreed that the interconnected nature of these different levels means that they should not be viewed in isolation and as being mutually exclusive; nor should the link between TradFi and AFS be overlooked. Both national and criminal actors are typically agnostic to the service they use, favouring whichever is the most appropriate for their needs. The connection between Chinese underground banking and the global trade system was given as an example.

Before turning to motivation – the core theme of the workshop – participants agreed that the discussion should couple motivation with the practical realities of how countries are developing AFS and how they (along with kleptocrats and other criminal and threat actors) use these systems to their advantage. Lastly, it was agreed that it is important to distinguish between the use of the US dollar as the basis for payments (as noted in the first and second levels of activity above) and for national wealth protection (in the form of central bank reserves), and that the conversation that followed would focus primarily on the payments dimension of AFS.

Motivations: Strategic Autonomy, Necessity, Advantage and Improvement

During the workshop, three primary categories of motivation that lead countries to develop AFS were identified:

• Strategic autonomy: Larger or emerging powers pursue AFS to assert control over financial flows and reduce dependency on Western financial institutions and currencies. This can be seen through the development of AFS to avoid the impact of G7 sanctions.
   
• Necessity: Small states, such as Small Island Developing States (SIDS) and developing economies, often adopt AFS due to exclusion from the global financial system. De-risking or lack of Western correspondent banking access holds back their future economic growth potential.
   
• Advantage and improvement: Innovative states are taking advantage of new commercial and influence opportunities to provide services and opportunities that compete with the status quo.

An analysis of motivations conducted during the workshop demonstrated that the reasons countries and individuals build and engage with AFS are not inherently ‘good’ or ‘bad’. Rather, they evolve along a spectrum shaped by diverse interests, vulnerabilities and strategic goals, which the workshop explored in detail, as outlined below.

Strategic Autonomy: Geopolitical Fragmentation and De-Dollarisation

Two of the key motivations driving the development of AFS are growing geopolitical fragmentation and the realignment of global power. In this context, the emergence of competing alliances has accelerated the development of the active financial measures they deploy, including AFS. However, while official messaging often emphasises the unity of these blocs, workshop participants underlined a more complex reality. In practice, cooperation is not synonymous with alliance.

The discussion was opened by one participant who noted that when examining the relationships between actors, it is important to remain aware of the inherent Western bias in how these dynamics are perceived. Regulation is often presented as a neutral mechanism to ensure order and compliance, but in practice, it is shaped by underlying power structures. In the context of the global financial system, where the US dollar remains dominant and the FATF seeks to impose global regulatory standards, regulations tend to reflect and reinforce a Western-centric, rules-based order. In short, those who hold financial power not only shape the rules but also influence how they are applied – making regulation inherently politicised and reflective of broader geopolitical interests.

Participants discussed motivations in different countries and regions. Recent geopolitical shifts have cast China as the strategic player, maintaining a delicate balance between its status within the traditional financial system and its efforts to develop alternative mechanisms. Its Cross-Border Interbank Payment System (CIPS) does not yet aim to replicate the longstanding, globally operating service provided by SWIFT, but rather seeks to enhance regional efficiency in cross-border transactions. This reflects a broader trend in which states pursue distinct strategies shaped by their own interests and constraints. In the case of Russia, G7 sanctions have played a catalytic role, pushing it to accelerate the development of AFS; meanwhile, petrodollar states are playing a ‘best deal’ game, leveraging both Western and non-Western systems. India adopts a flexible posture, cooperating with and antagonising different powers as circumstances shift. Looking beyond these core actors to the states orbiting them reveals multiple, diverse motivations. For example, countries such as Brazil, South Africa, Egypt and Ethiopia are reluctant to sacrifice ties to the West, given their economic importance, but still recognise potential benefits in alternative alignments.

The examples above and the dynamics they capture expose asymmetric relationships – such as those between Russia and China – and reveal a spectrum of strategic behaviours.

Those strategic postures need to be understood in the context of the ongoing desire among some countries to reduce their reliance on the US dollar for payments. However, the concept of de-dollarisation should not be interpreted as a straightforward replacement of the dollar with a new dominant currency, like some form of cryptocurrency or the Chinese yuan. Instead, as a participant observed, it reflects a broader transition from ‘one-to-one’ to ‘one-to-many’ systems.

It is worth noting that historically, many currencies co-existed, and that the current dollar dominance is relatively recent. Looking back to the post-war era, much of the debate surrounding the Bretton Woods framework focused on creating space for countries to maintain autonomy within an emerging international order. At that time, sovereignty was closely linked to the ability to limit global liquidity and retain control over national monetary policy. Under this framework, participating countries maintained fixed exchange rates while retaining the ability to regulate capital flows – an arrangement designed to protect national sovereignty. In contrast, today's conception of sovereignty often centres on the ability to freely access global liquidity. Thus, the notion of independence has expanded to include more flexible forms of equity and financial autonomy.

As a result, multiple financial platforms are emerging that coexist and serve different functions. For instance, there is currently no evidence suggesting that cryptocurrencies will entirely replace the dollar (indeed, leading stablecoins are driving demand for US dollar assets), but modern technologies are opening new opportunities for coordination.

The current trajectory of de-dollarisation is marked by fragmentation rather than uniformity. For example, the Russian financial messaging system SPFS (Система передачи финансовых сообщений, СПФС or System for Transfer of Financial Messages) and the Chinese CIPS illustrate uneven approaches to building alternatives: while both aim to reduce reliance on the Western-dominated SWIFT system, they are grounded in different technological capabilities, geopolitical priorities and ambitions that are not necessarily coordinated. This lack of alignment underlines how AFS developments are often shaped more by domestic imperatives than by collective vision.

In this context, concerns over large-scale shifts – such as Brazil, Russia, India, China and South Africa (BRICS) developing a joint cryptocurrency – may be overstated. What is emerging instead is a network of non-dollar banking links that provide practical workarounds for certain forms of payment without attempting to fully replace the dollar.

In sum, it was agreed that what we are witnessing is not a monolithic movement away from the dollar, but a multipolar diversification of financial infrastructure, driven by necessity and opportunity rather than by ideological or systemic coherence.

At the same time, there was a recognition among workshop participants that Western constructs such as the US dollar and the FATF framework still dominate and also provide the most reliable source of financial system integrity. While political rhetoric frequently expresses opposition to this status quo, in practice, many AFS continue to depend on these Western-rooted foundations.

The attractiveness of the dollar-based system as a payment mechanism is undoubtedly weakening, even if only marginally. Nonetheless, we are observing an underlying tension between political rhetoric and the operational reliance of those actors who wish to move away from the US dollar – recognising that, as a store of value and a fundamental element of central bank reserve management, it remains critical.

Necessity: Financial Inclusion and De-Risking

SIDS and other less developed countries face increasing exclusion from the global financial system due to de-risking by Western correspondent banks. These states often lack the domestic, financial and regulatory capacity to meet the tightening demands of their international banking partners and the FATF. This loss of access to banking significantly limits their ability to engage in international finance and trade.

As a result, many of these countries are exploring alternative economic models – such as visa and investment schemes, shipping registries, and establishing hubs for new payment systems such as crypto and innovative technologies – to attract capital and national income and to maintain financial connectivity. While some of these approaches (such as investor visas) may raise concerns among the international community, others (such as alternative payment systems) represent legitimate pathways for economic survival and growth.

The political dimension of these developments is central: these states are strategically hedging their bets, and managing national economic security risks, by seeking multiple financial alliances to reduce dependency on any single system. However, their small size and limited oversight capacity make them vulnerable to both exploitation and regulatory gaps. At the same time, these constraints create space for entrepreneurship and technological innovation, revealing a complex interplay between risk, necessity and opportunity in the development of AFS.

Advantage and Improvement: New Opportunities

Some actors are motivated by a desire to modernise and improve the current financial system – not out of rejection, but out of frustration with inefficiencies. Countries like Singapore or India are not trying to bypass the system entirely but instead attempting to enhance it through technological means.

Innovation is occurring at the regional level, and many AFS initiatives aim to solve specific, technical problems in payment networks among those affected. These efforts are less about opposition and more about updating or fixing existing structures. The international financial system is constantly adapting, and technology provides an opening for reform – even if regulation has not fully caught up.

In this context, the potential of blockchain should not be underestimated; while not always intended to undermine state control, it does offer an avenue for autonomy that operates beyond traditional G7 or FATF oversight.

Actors: State, Criminal and Concierge-Style

During the workshop, three primary categories of actor were identified as key participants in the development, use or facilitation of AFS:

• State actors: Governments, particularly those under sanctions or pursuing greater financial sovereignty, are often at the forefront of AFS developments. These include both strategic state initiatives and the actions of kleptocratic elites who use AFS to move, obscure or protect wealth beyond the reach of conventional scrutiny.
   
• Criminal networks and non-state actors: This broad and often informal group includes organised crime, terrorist networks and ideologically motivated non-state actors. These actors exploit AFS to bypass regulation, obscure transactions and operate outside the formal financial system.
   
• Concierge-style enablers: These actors can be professional and non-professional, and consist of legal, financial, technological and information-sharing actors who design, facilitate or legitimise AFS. Their involvement may be deliberate or incidental, but it plays a critical role in enabling access and usability across all other actor categories.

Workshop discussions emphasised that these actors often operate in overlapping or hybrid capacities, and their engagement with AFS reflects a mix of strategic intent, opportunism and systemic gaps. The rest of this section is based on the workshop discussion which explored each actor group in more detail, highlighting their roles, incentives and impact.

State Actors: The Nexus Between Foreign Policy, Security and AFS

The way that AFS are used has a growing impact on global security, and especially on the security of Western democracies. A topic frequently raised by participants was the role of sanctions and their impact on the acceleration of the rollout of AFS. Sanctions have become a core foreign policy tool, but the relentless G7 sanctions on Russia have brought numerous unintended consequences – including a tightening of cooperation between states with varied levels of relationships with the West to develop AFS. As traditional financial channels are closed off, alternative systems are developed to bypass these constraints. Restrictive measures imposed by countries that dominate the current global financial framework inevitably triggered an AFS response, which participants expect will outlast any future reversal of sanctions on Russia.

This process of constant adaptation on both sides accelerates shifts in the global financial system, fragmenting the status quo and undermining its integrity. It was noted during the workshop that there is extensive talk among individual countries and groups of countries on developing parallel financial infrastructures; however, technological limitations, a lack of trust within alliances such as BRICS, and a lack of trust in alternatives to the financial systems dominated by Europe and the US may prevent this talk from fully materialising. Even so, the growing use of sanctions continues to make investing in AFS development more attractive – and in some cases, essential – for sanctioned states like Russia, North Korea and Iran, thus overcoming previous political barriers.

A wider geopolitical lens and a consideration of ‘proximity of risk’ was proposed by a representative from the public sector, noting that risks can evolve from the medium to long term and can become entrenched. The concern is that geo-economic fragmentation – seen, for instance, in the rising influence of BRICS – may reduce Western democracies’ ability to exert economic pressure. AFS, therefore, are not just a byproduct of financial innovation or criminal need – they are also a tool of strategic repositioning.

One example of this concern proposed by a participant is reflected in China's ongoing stockpiling of gold, which many interpret as a strategic hedge – possibly in anticipation of future decoupling, rising tensions over Taiwan, escalating trade disputes or broader geopolitical shifts. During the workshop, participants discussed the importance of identifying the right indicators to monitor these developments. One particularly thought-provoking question was raised: what if China were to issue a stablecoin backed by US dollar reserves? Such a move could blur the lines of traditional monetary boundaries and pose a direct challenge to the current US-led global financial order.

Another group of state-related actors interested in the development of AFS are kleptocrats and authoritarian regimes. Through that lens, AFS present a complex duality in the context of global governance and financial integrity. On one hand, they can serve as tools for kleptocrats and authoritarians to circumvent the international financial system, which is underpinned by a rules-based order and regulatory frameworks such as those established by the FATF. These actors exploit decentralised or less-regulated platforms to obscure financial flows, launder assets and evade accountability. On the other hand, it is important to recognise that AFS also offer vital opportunities for individuals living under authoritarian regimes or kleptocratic governance who lack trust in their domestic financial institutions. Consider, for example, the use of stablecoins by opposition communities in Myanmar, which can no longer use the formal financial system following the 2021 military coup. AFS can thus provide a form of liberation from financial repression, offering greater stability, security and protection of assets from unlawful seizure. Thus, while AFS pose real risks in terms of enabling kleptocracy, they simultaneously function as lifelines for those seeking financial autonomy and protection under repressive regimes.

When discussing responses to the security challenges posed by state actors developing and using AFS, private sector collaboration emerged as an essential part of managing AFS-related risks. One speaker from a multinational bank described a geopolitical interest group which includes 35 member institutions (mostly UK-based banks with US participants and major European players) and which conducts scenario planning and produces forward-looking reports on geopolitical financial developments. It was agreed during the workshop that such private–private and public–private collaborations are invaluable, especially as the financial system becomes increasingly entangled with security and foreign policy concerns.

Criminal Networks and Non-State Actors

A central concern discussed during the workshop was the role of AFS in enabling the financial activity of serious and organised crime groups.

The UK’s experience with Operation Destabilise was presented as a case study during the workshop. This operation focused on professional money launderers operating across Russia, the UK and the Middle East. The case detailed how cash was moved out of the UK and how sanctioned individuals’ funds were funnelled into property investments to extract money from Russia.

This case study highlighted the ‘mix-and-match’ approach taken by criminal actors, with traditional cash-based operations increasingly used in tandem with AFS options such as cryptocurrencies. The case also demonstrates the interplay between organised crime and national security, and the importance of improving our understanding of how criminals operate across both TradFi and AFS.

During the workshop, participants also discussed Chinese underground banking and how it intersects with developments of AFS which, in this case, work both against Beijing and against Western individuals that are victims of related crimes. A participant from a think tank summarised their recent research examining this growing shadow banking channel, especially in North America. According to the participant, while there is no direct link to the Chinese government, the trend is clear: some individuals in China are seeking access to US dollars, bypassing formal channels and capital controls. On the surface, the participant elaborated, this might appear to benefit China – dollars flow in, and capital circulates – but these underground flows are deeply uncomfortable for Beijing. They operate outside state control, undermine capital restrictions and signal a quiet, persistent demand for financial alternatives that challenge the centralised grip of China's financial system.

Concierge-Style Enablers

A key thread throughout the workshop was the varied ecosystem of actors enabling abuse of AFS, ranging from traditional professionals to non-professional intermediaries including state-linked networks. Participants emphasised that the definition of an ‘enabler’ must be expanded beyond the conventional view of lawyers and accountants to include a wider array of actors operating across formal and informal systems.

Non-professional enablers, or individuals who may not belong to regulated professions but nonetheless play a crucial role in facilitating illicit financial flows, emerged as a particularly important category. As a participant representing a think tank described, even in the absence of formal credentials, there exists a ‘cottage industry’ of people who coach others on how to set up financial systems to avoid detection, such as helping secure or pass on EMI (electronic money institution) licences or providing guidance on laundering through cryptocurrency. On platforms like Telegram, entire channels are dedicated to teaching individuals how to move money in and out of jurisdictions like the UK without attracting regulatory attention. These are not professional enablers in the traditional sense, but they are more accessible than those that provide high-end services, and they are equally effective for those whom they service.

Another participant referred to this group as the ‘criminal glue’ linking broader networks together. These middlemen – who might connect cash-rich actors with cash-poor individuals – are instrumental in sustaining operations like scam centres in Southeast Asia. These centres, often tolerated or ignored by local authorities, were noted as having informal political alliances – particularly in places like Myanmar, where their operations directly impact fraud levels in wealthier and more developed countries. As one participant observed, the overlap between scam hubs, informal political protection and transnational fraud suggests a deeply entrenched ecosystem of facilitation.

The professional tier of enablers also remains highly relevant. A participant representing a government posited that the entire AFS system is underpinned by professional enablers that develop new tools for those seeking alternatives to the traditional payments system, dominated by the West and the US dollar. These enablers includes those in regulated professions like law and accounting but also expands to include newer facilitators operating within digital and hybrid financial systems. In that context, participants agreed that while efforts have intensified to tackle the role of professional enablers in criminal activity, major gaps remain. An example of such failure was provided by a review of an investigation into UK property owned by investors from Bangladesh – purchases that were facilitated by lawyers, banks and wealth managers – raising questions about the extent of the due diligence conducted by these enablers.

Another participant raised a further evolution in the enabler landscape: the role of bridging actors and the growing automation of facilitation. For instance, in North Korea, armies of bots are deployed to handle crypto-based funds, bypassing the need for human money mules as required in a traditional ‘analogue’ money-muling operation. These actors are difficult to trace and reflect the growing role of the intersection of automation, AI and illicit finance. Similarly, in the case of Operation Destabilise, which was often referenced during the workshop, Russian actors were found offering what amounts to a concierge service for laundering: tailored, professional-grade assistance that did not necessarily involve traditional professional enablers but was every bit as systematic and effective.

Finally, the workshop highlighted that this actor landscape is deeply embedded within both formal and informal economies and often spans across jurisdictions. As an example, one participant pointed to financial centres that frequently encounter (and often facilitate) crimes that originate elsewhere, especially in relation to AFS typologies like hawala, virtual assets (including stablecoins) and virtual IBANs.

Across all these examples – whether scam centres in Southeast Asia, crypto-based laundering rings or professional facilitators in international finance hubs – the common thread is the presence of concierge-style actors offering systems: ways to move money, avoid detection and bridge gaps between the traditional and alternative systems. It was noted during the workshop that this suggests the emergence of an industry of facilitators, where the boundaries between criminal networks, enablers and even state actors are increasingly blurred.

Having reviewed motivations and actors, the workshop discussion turned to the role of innovation and product development.

Innovation and Product Development

While the concept of AFS is not new (given the existence of longstanding solutions such as hawala), innovation and product development within AFS have been accelerated by rising geopolitical tensions. These tensions have fuelled demand for AFS innovation directly – for example, to circumvent sanctions – and indirectly – for example, by creating greater space and vulnerabilities for organised crime and other bad actors to exploit. This helps to explain the demand for AFS to support operations.

As with the rest of the workshop, the discussion fell into distinct sections, in this case covering the evolution of traditional products and the role of digital development.

The Evolution of Traditional Products

Two main areas were considered by participants in this category: gold and hawala. Gold has always played an important role in managing a nation’s economic reserves and broader economic security. However, beyond its financial management role, gold has also long been used by criminals seeking to operate value transfer schemes outside the formal financial system. It is also increasingly used by states looking for a safe and secure asset beyond the reach of those that control the traditional financial system. This latter use may not be for nefarious reasons, but participants agreed that as geopolitical tensions mount, gold is likely to play an increasingly important role as part of the AFS.

The hawala system, a highly efficient method of moving money across borders, especially by diaspora communities to those in unbanked home countries, has long attracted scrutiny for its potential to operate beyond the reach of supervisors and law enforcement. This part of the discussion was striking, as participants identified how hawala is being linked with digital solutions Ito offer a more flexible product that is likely to expand the use of hawala – and thus the challenge of law enforcement and supervisors – further.

The Role of Digital Developments

Several participants proposed that the evolution of cryptocurrencies has created a modern-day version of ‘offshore banking’, where crypto wallets are the new numbered bank accounts favoured by criminals and the corrupt. Others pushed back on this characterisation, but it was agreed that the advent of blockchain and cryptocurrency technology is presenting the market with a step-change in AFS options. Furthermore, this combination of digital developments – including products such as cryptocurrencies, stablecoins, virtual IBANS and other FinTech innovations – with a lagging supervisory response provides an AFS landscape that is, for the time being, wide open for exploitation by any of the groups of actors identified during the workshop.

One topic that was also briefly touched upon in the workshop was the role that central bank digital currencies (CBDCs) might play in AFS development. Despite CBDCs being the subject of considerable research and development in recent years, experts from the central banking community raised the possibility that CBDC development might be overtaken by the booming interest in stablecoins. As one participant pointed out, CBDCs have often been seen ‘as a solution in search of a problem’. With stablecoins providing a synthetic form of digital currency (most often the US dollar), the use case for CBDCs has receded even further. Given, in addition, the Trump administration’s loathing of CBDCs, this field of innovation was seen as unlikely to revive any time soon.

In summary, participants agreed that none of these product sets operate in isolation; rather, the development of AFS has created new possibilities. For example, cryptocurrency payments have been used to settle hawala balances in a more efficient manner than has been previously possible; or, as with Operation Destablise, AFS have connected the laundering of the cash proceeds of drugs crime in the UK with Russian cryptocurrency networks.

Emerging Policy Responses

The concluding discussion focused on the policy responses needed to maintain and adapt the traditional financial system in the face of the motivations for change. The continued effort by actors outlined above to take advantage of systemic vulnerabilities to operate beyond the reach of the traditional financial system has catalysed a constant evolution of the traditional system in terms of regulation and product offering. AFS, like the internet, are designed to promote global trade and prosperity but have also been co-opted to support criminals, kleptocrats and the corrupt, as well as to facilitate both threats to democracy and wider hostile state activity.

This raised a key policy question: what should individuals and organisations that are central to the continued dominance of the traditional financial system do to ensure it remains attractive and effective, especially to those that might be motivated to move outside this sphere of influence?

In response, participants broadly agreed that adaptations are needed in order to extend the influence and engagement of the traditional financial system, and reduce unintended consequences, by focusing on the following areas:

• Enhancing innovation and agility: Participants unequivocally stressed the importance of maintaining flexibility and embracing innovation. If the dominance of the current financial system is to be preserved, it needs to respond to the challenges posed by AFS, by remaining open to innovation. At the same time, this innovation needs to be guided in order to offer responses that coincide with the motivations of those that challenge the status quo. The promotion of US dollar-backed stablecoins by the Trump administration, and the concerns in China that this has ‘fundamentally reshaped the traditional payment landscape’, underline this point.
   
• Expanding supervisory perimeters to address blind spots: There was consensus around the table that innovation is outpacing regulation – and thus, the field that is within the reach of regulators and authorities is shrinking as the decentralised financial universe expands. One participant noted the important role that central banks (including the Bank for International Settlements) should play in keeping up with innovation to guide, not hinder, the evolution of the global system; yet, this participant observed that these institutions usually adopt concepts that have already been invented, which is not, and cannot, be misunderstood as innovation. Furthermore, the slow pace at which supervisors and law enforcement adapt leaves innovations unchecked and open to abuse for many years while these authorities catch up.
   
• Promoting financial inclusion and market access: Participants agreed that the challenges are not only technical; they also present real-world consequences. Ministries of foreign affairs, like the UK’s Foreign, Commonwealth & Development Office, must both engage globally to gather insights into the issues which countries are facing that might encourage them to embrace AFS, and also work urgently to develop solutions via international and multilateral collaboration. The failure of this process was highlighted by one participant, who referenced the G20 Roadmap for Enhancing Cross-Border Payments and the lack of progress it had delivered. 
  
  A particular point of vulnerability remains the risk management scrutiny placed on correspondent banks, which can incentivise them to make rational decisions – notably closing accounts and withdrawing from higher-risk or commercially unviable countries – that often conflict with broader foreign policy interests that might prefer continued financial engagement. Although, according to one participant, the situation is less severe than it was a decade ago during peak terrorism-related de-risking, the UK and other democracies nonetheless continue to lose strategic relationships and allies due to these risk-reduction practices. 
  
  A participant with experience of working with SIDS emphasised the importance of Western countries bringing these smaller states together to share their experience with AFS and responding positively to the challenges that are raised. These states are hedging and creating alternatives, given the importance of financial system access to their economic security. Providing a credible platform for addressing their concerns is urgently needed. In that context, the conversation turned to regional diplomacy. 
  
  Australia emerged as a notable example, given its relationships with SIDS (islands where de-risking and resultant financial exclusion have been widespread). This has created security challenges, as Chinese banks have replaced banks from the West as they withdrew their services from SIDS. This pivot towards AFS underscores the need for a more coordinated and inclusive strategy from governments, and enhanced public–private cooperation to secure national interests by cooperating with the private sector. A best practice response that demonstrates a proactive effort to preserve regional economic stability and limit reliance on state-owned alternatives is Australia’s Pacific Banking Guarantee Bill 2025 which supports Australian banks’ operations in the Pacific to prevent financial de-banking. This is an approach other Western governments could emulate in the context of countries that turn to AFS out of necessity.
   
• Addressing financial stability and economic risks collaboratively and internationally to mitigate fragmentation risks: The emergence of unintended consequences was the final point of focus. A well-known unintended consequence stems from the two-decade focus on driving terrorism finance and other forms of illicit activity out of the financial system. This has led key players in the financial system to adapt their operations, forcing some countries to seek AFS as they lose access to the traditional system. Rapid development of AFS is providing these countries and actors with alternatives which they did not have previously. 
  
  Another unintended consequence stems from actions taken by countries and actors to secure advantages which lead to systemic risks, especially to national and global financial stability. For example, the development of financial systems that are not backed by the full faith and credit of a state – such as systems built on cryptocurrencies or on shadow and unregulated banking operations – can present potentially calamitous risks for countries and their populations. In addition, participants noted that the fragmentation of the financial system and the rising reliance on cryptocurrencies posed a further threat to financial system resilience as a result of heightened vulnerability to cyberattacks.
   

In conclusion, the workshop identified that a lack of strategic thinking among those that have typically dominated the operation and oversight of the financial system has led to the accelerating development of AFS, as the motivations of a range of different countries and actors had not been sufficiently accommodated by those who have traditionally stewarded the international financial system. The longstanding, unipolar nature of this stewardship and the centrality of the financial system to global security is being challenged; unless rapid and innovative responses within the existing system are designed and supported, those for whom this system falls short have ample opportunities to develop alternatives.

It was lastly agreed that three objectives should underpin RUSI’s future work in this field:

• Understanding more clearly the motivations of countries that make AFS decisions out of economic security necessity (rather than out of hostility towards the stewards of the existing system).
   
• Facilitating dialogue – including with the private sector – on how the traditional financial system needs to adapt for those users that are dissatisfied with the status quo, to keep them within the rule-based global financial system.
   
• Working with civil society and investigative journalists from the Global South to raise awareness and understanding of the threats AFS pose to democracy, and enhancing monitoring of the exploitation of AFS by kleptocrats.