The Empire’s Backbone is a Spreadsheet
The U.S. dollar’s centrality to the global financial system is rooted not only in its function as the dominant reserve and transaction currency, but also in the infrastructure that enables its movement—namely, the interconnected systems of clearing and settlement. These systems, primarily composed of Fedwire, CHIPS, and the SWIFT messaging network, form the arteries through which trillions of dollars flow daily. As the financial world undergoes transformation driven by digitization, multipolar geopolitics, and shifting liquidity preferences, the adequacy of this legacy infrastructure is increasingly called into question. This is not merely an exercise in operational refinement; rather, it involves redefining how value moves across borders and between institutions in ways that are secure, instantaneous, inclusive, and resilient.
The architecture of dollar clearing and settlement rests on a triad of systems with distinct functions and operational models. Fedwire, operated by the Federal Reserve, is the primary real-time gross settlement (RTGS) system for large-value USD transactions. It offers immediate and final settlement in central bank money, meaning every transaction is completed with the highest level of safety and irrevocability. CHIPS, in contrast, is a privately operated system managed by The Clearing House. It provides multilateral netting, allowing for liquidity efficiency by settling only the net obligations between member banks at the end of each day. While not final in central bank money until the final leg, CHIPS is highly efficient and processes a large share of international dollar flows. Complementing these is SWIFT, a global financial messaging network that transmits payment instructions and other financial information between institutions across borders. SWIFT does not move money itself; it facilitates the coordination and confirmation that underpins trust in transactions that are eventually settled through systems like Fedwire and CHIPS. The synergy of these three platforms has formed the core of dollar settlement infrastructure for decades.
Understanding the USD clearing hierarchy is essential to appreciating both its strengths and its limitations. At the apex is Fedwire, representing the purest form of final settlement in central bank liabilities. Direct access is limited to institutions with Federal Reserve master accounts, typically large domestic banks and a handful of privileged foreign entities. Below this are systems like CHIPS, which rely on participants pooling liquidity and settling netted positions, still requiring Fedwire for finality. At the base of the hierarchy are global correspondent banking arrangements, often conducted through SWIFT messages and involving multiple intermediary banks. These arrangements serve institutions that do not have direct access to the upper layers of the hierarchy. This tiered structure reflects varying degrees of risk, speed, cost, and control. Institutions lower in the hierarchy rely heavily on the creditworthiness and operational efficiency of intermediaries, which adds latency and systemic exposure. The farther from the center an entity is, the more friction it experiences in dollar transactions, and the more it is exposed to disruptions in counterparties or intermediaries.
Several issues plague the current system, especially when viewed through the lens of a multipolar and digitally evolving world. Firstly, the reliance on correspondent banking remains a significant bottleneck. It introduces not only higher costs and slower settlement times, but also significant counterparty and jurisdictional risks. These risks are magnified for entities in emerging markets, where limited access to top-tier intermediaries makes dollar funding unreliable and expensive. Secondly, the split between messaging (SWIFT) and settlement (Fedwire and CHIPS) means that informational finality often precedes or misrepresents actual monetary finality, leading to reconciliation challenges and operational ambiguities. Thirdly, the system’s geography-dependent operational windows cause time-zone mismatches, complicating global liquidity management. The design also reflects assumptions from an earlier era of geopolitics. The weaponization of SWIFT as a tool of economic sanctions has prompted adversaries and neutral actors alike to reconsider their dependence on dollar-based networks, raising questions about the long-term inclusiveness and neutrality of the infrastructure. Lastly, there is growing concern about cyber resilience. These legacy systems, while robust, are centralized and could be vulnerable to targeted disruptions or cascading operational failures.
A modern framework for thinking about the clearing and settlement of dollar-denominated assets must therefore be rooted in a few core principles. It must ensure transactional finality without relying on excessive credit intermediation. It must provide transparency in the sequence and timing of settlement. It must broaden access to a wider set of qualified actors while maintaining necessary controls. And perhaps most importantly, it must be adaptable and programmable, capable of supporting conditional logic and dynamic risk controls that respond in real time to a rapidly changing liquidity environment. Any viable reform must start by reexamining the roles of central bank money, credit money, and tokenized representations of value. A key conceptual distinction is between messaging—where value transfer is initiated—and settlement—where obligations are legally discharged. Conflating the two leads to systemic blind spots.
Technological innovations offer credible pathways to reform. Distributed ledger technology (DLT) is already being tested in various central bank projects and private-sector platforms. DLT promises atomic settlement, where payment and asset exchange occur simultaneously, reducing counterparty risk and the need for reconciliation. In a DLT-enabled system, settlement instructions and confirmations are unified, enhancing auditability and reducing latency. Central bank digital currencies (CBDCs), particularly for wholesale use, could allow direct settlement in central bank liabilities without requiring physical or traditional electronic reserves. A wholesale digital dollar, interoperable with DLT-based asset networks, could preserve monetary sovereignty while allowing for programmability and real-time risk management. ISO 20022, the new messaging standard being adopted globally, improves data richness and semantic consistency, allowing greater automation and compliance across systems. Private sector efforts like JPMorgan’s JPM Coin and Onyx platform demonstrate that programmable settlement is not only technically feasible but already in limited production.
Institutional changes will need to accompany technological upgrades. A major issue is access. Today, only a small group of U.S. and foreign banks can access Fedwire directly. A more inclusive system might consider tiered or conditional access for regulated fintech firms, non-banks, and overseas central banks operating in dollarized economies. A critical policy question will be how to balance inclusion with systemic risk containment. Interoperability between public and private networks will also be key. There may be a role for licensed private actors to operate digital settlement layers under supervisory frameworks, creating bridges between CBDC networks and legacy banking rails. Governance models must be devised that prevent monopolization of these new infrastructures while preserving transparency, dispute resolution, and resiliency.
Several scenarios for the future can be envisioned. One possibility is a central bank-led upgrade of existing infrastructure, extending Fedwire operating hours, implementing real-time cross-border settlement corridors, and potentially rolling out a wholesale digital dollar. Another model could see private institutions expanding CHIPS-like structures onto DLT, backed by tokenized collateral and real-time credit risk management. A third, more radical vision involves a fully decentralized settlement infrastructure, where programmable digital cash and assets move peer-to-peer through smart contracts with minimal intermediary involvement. Each of these carries trade-offs in terms of control, efficiency, and risk. What matters most is not the form, but that the principles of neutrality, interoperability, and systemic visibility are preserved in the new paradigm.
Ultimately, the continued dominance of the U.S. dollar as a global medium of exchange, store of value, and unit of account depends as much on the credibility and accessibility of its infrastructure as on its macroeconomic foundations. In a world increasingly defined by real-time commerce, digitized assets, and decentralized actors, it is untenable that access to dollar clearing remains gated by legacy systems and constrained operating hours. For crypto-native fintechs and digital-first institutions, the existing architecture presents profound structural barriers. These entities, often denied access to Fedwire or even reliable correspondent networks, are forced to operate in the gray zones of stablecoin liquidity, proxy banking arrangements, or permissioned walled gardens. Their ability to innovate is stifled not by technological limitations but by regulatory and infrastructural exclusion.
To integrate meaningfully, such firms will either need tailored access frameworks—tiered connectivity to central bank settlement layers—or they must invent an alternative paradigm altogether. This could take the form of interoperable stablecoin systems backed by tokenized reserves, private settlement networks pegged to USD, or even decentralized clearing protocols that obviate traditional intermediation altogether. However, for such innovations to gain scale and legitimacy, they will require not only regulatory recognition but also real bridges to the fiat infrastructure that still defines systemic liquidity. The goal should not be to circumvent the dollar’s institutional core but to modernize and extend it—replacing opacity and fragmentation with programmability and openness. The path forward is not about overthrowing the old regime, but about upgrading the nervous system of global finance before its fragility becomes its undoing.
