A historical analysis of the payment system from early stages to digital currencies

1. Introduction

Payment systems are fundamental organizational frameworks that allow economic entities to exchange economic value, such as goods, services, and financial assets. Payment systems have developed over time, both physically and technologically, from ancient barter to today’s digital economic infrastructure, acting as a unit of account, medium of exchange and store of value in various ways. See McLeay, Radia, and Thomas (2014), Boel (2019), and Peneder (2021).

In today’s economies, payment systems are more than means of transferring money; they represent institutional frameworks, create financial credibility, and rely on digital protocols. Modern bank deposits are essentially electronic forms of money; however, the mechanics of creating, clearing, and settling payments have undergone profound changes over the centuries. The evolution of payment systems includes commodity-based exchanges involving cattle, salt, and shells, to paper-based financial instruments including cheques and giro systems, and finally to today’s systems, such as ACH networks, payments cards, and mobile apps. See Chakravorti and McHugh (2002), Amith Donald Menezes (2017), and Anbukarasi and P.J (2024).

Network effects often support and ultimately influence the uptake and use of payment sys- tems because of the extent to which their increased use increases the value and usefulness of the payment system itself. Data-driven use has helped to create global payment standards such as SWIFT. Today, these systems not only perform a technical function, but also act as geo-economic levers in the politically sensitive global finance architecture. See Scott and Zachariadis (2012) and BIS (2020).

The shift to non-cash payments represents a major social change, with an emphasis on con- venience, speed, and efficiency. However, it raises questions about data protection, financial supervision, and the exclusion of marginalized users (Celestin and Sujatha, 2024).

2. From barter to early money: The origins of exchange

2.1 Limitations of the barter system

Barter is the direct exchange of goods and services. There were a number of restrictions on transactions that occurred with barter. Most notably, there had to be a double coincidence of wants – both trading parties had to possess what the other wanted. It is thought that this inef- ficiency limited the scope and complexity of the early trading networks and economic systems. Anthropologists study barter in order to understand the conditions under which it was prac- ticed. When it was present, barter was often incorporated into systems of gift exchange and informal lending, which suggests that it was not a primary mode of trade in most societies. See Hann (2006), García (2018), and Fauvelle (2025).

2.2 Emergence of commodity money

To reduce the vulnerability and restrictions of barter, many ancient societies began to adopt commodity money – objects that were widely used as a precursor of money. Commodity types vary by geography and culture. These items commonly exhibited key properties such as divis- ibility, durability, portability, and fungibility.

Historical evidence shows a wide range of commodity choices. Cowry shells were used as currency in Asia and Africa; salt was used as money in many Mediterranean and sub-Saharan African areas; cocoa beans circulated as money in Mesoamerica; and wampum beads circulated in early colonial America. Even in isolated settings, such as prisoner of war camps, cigarettes were used as money, as there was consistent demand for them from other prisoners. These early forms of currency were fundamental in developing the social conventions surrounding money and its use as a medium of exchange. See Radford (1945), Şaul (2004), Agha (2017), McKillop (2021), and Fauvelle (2024).

2.3. Transition to metallic coinage

Coinage metal originated in Lydia (modern-day Turkey) in the 7th century BCE. The first step of the process involved putting an electrum coinage, which is an alloy of gold and silver, into circulation. These pieces had markings of state symbols and standardized weights, helping develop trust and verifiability in exchanges while allowing the governing body to control and enforce money standards.

Metallic coinage stimulated long-distance and large-scale commerce, as it became a com- monly used money in imperial expansion. Gold and silver, being scarce, durable, and divisible, were widely accepted and symbolically reinforced the authority of states, contributing to the emergence of monetary sovereignty as part of a broader state-building project. See Mundell (2002), MacDonald (2017), Curta (2021), and Raza, Syed, Rizwan, and Ahmed (2025).

2.4 Theoretical frameworks in money’s origins

Metallist theory states that money developed spontaneously from market exchanges, as indi- viduals eventually started to accept the highly saleable or wanted commodity, such as gold or silver, not for its intrinsic usefulness, but because others accepted it in exchange. After a while, the general acceptance of commodity money began to take hold, as it gained momen- tum through its permanence, fungibility, security, and trust, reinforced by state protection. See Menger (1989) and Penchev (2014). The use of commodity money not only signified practi- cal use, but it also represented the initial stages of money as a socially constructed institution, arising from community exchange and trust, rather than from top-down imposition. Through bank developments and active states, money developed its institutional nature (Davis, 2020).

By contrast, chartalist theory argues that money derives its value essentially from the state, and not from the intrinsic value of the commodity. Money is accepted as payment because the state has decreed its use, particularly for paying taxes, which means that money is a legal instrument of public policy. See Wray (1997) and Ehnts (2019).

Search-theoretical models show how money can evolve or be created in decentralized mar- kets. Individuals start to accept certain goods, rather than trading them for their value or bar- tering them for their return, on the assumption that others will accept them, which reduces transaction costs and trade barriers. This makes the money, when interpreted or accepted, a social means of coordinating transactions that evolves from the constraints of barter logistics. See Kiyotaki and Wright (1990) and Iwai (1996).

3. Credit through time: Trust and financial exchange

3.1 Trust and reciprocity in early credit systems

In the first human societies, economic exchange was often informal and could take place with- out the use of formal currency. Delayed reciprocity, an informal and conditional form of credit based on social and personal trust rather than financial institutions, was the most common form of economic exchange (Sengupta and De, 2020).

This informal credit functioned without intermediaries or formal financial instruments such as banknotes and bills of exchange. Instead, informal credit is a collective social phenomenon based on mutual consent from shared social memory and reputational risk of default. An in- dividual’s engagement in exchange was therefore highly dependent on the predictable social norms of obligation (Hann, 2006).

These types of exchange practices exemplify that credit is an economic concept that precedes coinage and paper money. Credit emerges from styles of deferred exchange with social norms of enforcement and not via legal means or institutional norms.

3.2 Temples, palaces, and early record-keeping

In the ancient Mesopotamian city-states of Sumer and Babylonia, temples and palaces acted as proto-financial institutions that lent and distributed commodities at a level never seen before

the advent of banks. They lent grain and silver and charged a nominal rate of 33 percent on grain loans and about 20 percent for silver loans. See Hallo (1996), Roth (1997), and Hudson (2019).

They maintained cuneiform tablets that precisely detailed their loans along with the names of the borrowers, collateral, time to repay, and any goods that were exchanged. One method of accounting was using barley as a unit of account, and then they could convert values of wool, metals, and labor into barley equivalents to create a consistent price or debt that could be repaid in kind or with commodities that were exchangeable. Other records outlined labor assignments, food rations, and provisioning, suggesting temples were comprehensive admin- istrative agencies that also tracked the workers’ expenditures. See Podany (2003) and Cripps (2017).

They tracked relative prices to keep the value of goods and interest calculations consistent. For example, 400 sila of barley equaled one shekel of silver – a value that fluctuated seasonally – illustrating how price setting evolved within early regulatory frameworks (Powell, 1996).

They provided both monetary and insurance functions to cash-strapped families by lending money at low interest to support social cohesion and a sense of state legitimacy. They fostered centralized credit allocation and standardized weights and measures and initiated the develop- ment of written records. Moreover, they delayed the development of financial trust long before banking practice was born (Hudson, 2002).

In ancient Greece, certain cities became notable temple sanctuaries with their own financial management, such as the treasuries at Delphi and also the ones at Delos. These treasuries functioned as custodians of civic wealth, holding public funds for city-states and institutions, and serving as venues for sanctioned international lending. The Athenian state also ran its public revenues and wartime finances through central accounts in repositories that included the treasuries of the Delian League and temples that had deposits and loaned out money at typically lower interest rates than found in private lending. This utilization of the model of financial administration also represents an early way of citizens getting in place civic accountability over finance and social movements to record the capital they were entrusting to the future public. Both rulers and citizens kept records of how much they were worth and how much they owed on stones that served as stelae, records that publicly documented loans and repayments. See Economou and Kyriazis (2024) and Hudson (2024).

3.3 War, state power, and the rise of public finance

The increase in the scope and duration of wars in early modern Europe had a major impact on the subsequent institutionalization of public credit systems. As warfare shifted from a series of discrete and risky campaigns to a continuous military campaign, sovereigns increasingly em- braced debt financing as a way to finance long-term military expenditures. The Hundred Years’ War (1337-1453), among other conflicts, demonstrated the inability of private credit, even from the wealthiest elites, to support the financial needs of a prolonged war. In response, the new states centralized taxes, helping to increase the credibility of public debt. They also formalized debt instruments and developed legal frameworks for debt forgiveness, thus embedding credit instruments in the public administration structure. See Levy (2016) and Hendrickson (2024).

In the Italian Wars (1494–1559), the Italian city-states of Florence and Venice developed aspects of public borrowing through luoghiand prestiti– early state bonds backed by anticipated tax revenues. These fiscal mechanisms displaced the personal basis of credit with institutional obligations, channelled through merchant bankers who acted as intermediaries in the creation of sovereign debt contracts. See Fratianni and Spinelli (2006) and Pezzolo (2007).

In 17th-century England, an epochal change took place, as years of wars, especially the Nine Years’ War (1688–1697) and the War of the Spanish Succession (1701–1714), created a major transformation in public finance. The Bank of England was established in 1694 and allowed the government to issue funded debt with long maturities, funded by the power of parliament to impose taxation. This established borrowing as formalized system with predictable risk for the creditor and allowed the institutional state a substantial increase in the amount and duration of bonds that functioned as public credit. Public credit had formally transferred from a simple personal trust to an explicit legal institutional framework with tax, parliamentary powers, and central banking marked by fiscal sovereignty. See Bell, Brooks, and Moore (2009) and Brandon (2018).

3.4 Merchant networks and financial instruments

In the late Middle Ages, when long-distance trade reached a zenith, the networks of traders be- came a key channel for extending credit and developing new financial instruments. Merchants extended credit on the basis of myriad forms of trust, reputational leverage, and social enforce- ment mechanisms that relied heavily on networks, which is surprising in the absence of central banking and common legal institutions. See Levitin (2006) and Wechsberg (2014).

The bill of exchange – an essential financial innovation – was a written order enabling a mer- chant to initiate payment in one location to be settled in another. The bill of exchange allowed for value to be transferred across borders. Apart from serving as instruments of deferred pay- ment, bills of exchange gave rise to a phenomenon we now recognize as unique modern credit instruments, including promissory notes and letters of credit (Bolton and Guidi-Bruscoli, 2021). Merchant families such as the Medici, Fugger, and Rothschild established transnational fi- nancial empires based on complex systems of trust, documentation, and legal contracting, in which the language of credit and contractual obligation increasingly began to intersect. These merchant houses collaborated with correspondent banks in other cities, which honored bills of exchange either through personal trust networks or institutional guarantees. As a result, reputation emerged as a central mechanism for contract enforcement (Hoggson, 2007).

The Hanseatic League flourished between the 13th and 17th centuries as a decentralized trading union, bringing together cities from the north of Europe such as Lübeck, Hamburg, and Bruges. It operated in an independent commercial context, free of central government con- trol, and developed sophisticated business lending systems. Merchants used instruments like bills of responsibilities, letters of reprisal, and sealed ledgers to manage debts and accomplish payments across jurisdictional boundaries without an actual physical transfer. The League’s

Kontore (trading outposts) optioned trade documentation, weights, and measurements, and organized coordination of dispute settlements in merchant courts and quasi-legal legitimiza- tion. At this level of scale, economic agents developed complex payment and credit systems within a vast geographic reach. This established early conditions for transnational finance and embedded credit and trust into enforcement mechanisms independent of sovereign legal sys- tems (Kirby and Kirby, 2023).

As these practices matured, they helped to standardize credit instruments, develop mer- chant law, and establish commercial courts, all of which were foundational institutions that underpinned trade by lowering uncertainty and dispute resolution costs. Thus, credit evolved from a system grounded in personal trust to one increasingly institutionalized through com- merce and legal infrastructure (Trimble, 1948).

3.5 From personal trust to institutional legitimacy

In the past, social credit was based on trust, social memory, and informal standards embedded in institutions such as family, religious communities, and business networks. The repayment was made possible by moral suasion, through the application of social and communal penalties rather than legal ones.

One of the consequences of the expansion of trade and the increasing complexity of the economy in the late medieval and early modern periods was the slow institutionalization of credit practices. These practices have gradually moved to institutionalized forms, such as writ- ten contracts, accounting, litigation before a judge to obtain a decision that is legally enforced by the losing party, and reliance on state fiat institutions to enforce contractual obligations. Credit has become primarily governed by a formal set of rules and obligations that shift trust from the individual to the institution.

4. Paper money and banking foundations

4.1 Origins of paper currency: From imperial China to early Europe

The oldest known use of paper money was during the Tang Dynasty (7th century CE), then formalized in the state-issued paper currency of the Song Dynasty (11th century). Merchants initially used jiaozi – private promissory notes – to avoid the inconvenience of transporting bulky coinage. As trade expanded, the Song government centralized issuance by establishing a monopoly and introducing jiaochao, official state-backed notes redeemable in coin and usable for tax payments. See Von Glahn (2016) and Von Glahn (2018).

This practice was institutionalized through a central state monopoly on the fiat printing process, legal enforcement, sanctions by public officials, and guaranteed redemption in copper coin.

In Europe, by contrast, the use of paper money has taken many centuries and various forms of experimentation. The initial European banknotes were issued in Sweden from the Stock- holms Banco in 1661, followed by the Bank of England in 1694. The first forms of banknotes emerged from the merchant deposits of coins, and were used immediately by merchants and governments to issue loans (Ferguson and Srinivasan, 2013).

4.2 Instruments of exchange: Bills, notes, and merchant law

As trade became more centralized and long-distance by the late medieval and early modern periods, merchants devised instruments by which value could be traded over long distances without the physical transfer of currency, such as bills of exchange, promissory notes, and letters of credit. Financial instruments transferred value through space and time, allowed for later payment, and minimized travel risks and theft (De Roover, 1944).

A bill of exchange was a written, transferable order from one person to another, instruct- ing them to pay a certain sum of money at a specified time and place. The bill of exchange originated among 13th to 14th century Italian merchant-bankers, eventually becoming com- monplace in pan-European trade. As they became more popular, bills of exchange became a tradable instrument with the ability to be backed and resold. Bills of exchange laid the foun- dation for modern banking instruments and established the basic principles of liquidity, risk management, and interbank payments in modern banking systems. See (Usher, 1914) and (Kadens, 2004).

The Lyon fairs that emerged during the 15th and 16th centuries in France were significant international financial centers to which people and money from all over Europe would come to settle debts, endorse the bills of exchange, and normalize cross-border dealings for credit transactions – effectively functioning as a clearinghouse that later authored commercial legal institutions and expedited the establishment of a pan-European financial architecture (Braudel, 2025).

As these instruments became more widespread, commercial law, known as the LexMerca- toria, developed to regulate and enforce commercial obligations. Merchant courts and notaries were the judges and certifiers of such instruments. The growth of commercial law and insti- tutions to back credit enforcement played a crucial role in the standardization of these instru- ments. See Aigler (1923) and Benson (2002).

Eventually, states took merchant law and added it to their national legal systems. This cre- ated formal laws around instruments like promissory notes – which were first accepted legally by France and then codified for formal use through England’s Promissory Notes Act of 1704. The recording of this process demonstrated the institutionalization of the commercial credit and incorporated informal credit networks and lending into the formal legal system (Munro, 2003).

4.3 Banking institutions and the emergence of central trust

Moving from regionally organized banks to central institutions demonstrated a substantial evo- lution of formalization around credit and monetary trust. Before centralized banking became

popular, money exchanges were much more constricted and tied to the exchange of commodi- ties, either gold or silver, or bilaterally between any two banks or public lending institutions. And though the emergence of banking geared toward deposit institutions was concerned with the monetary stability of payments, successful transactions, counterparty risk, and managing state debt, as exemplified in the Banco di San Giorgio (Genoa 1407) or the Bank of Amster- dam (1609), wherein public banks furthered the business cycle for transacting by employing deposit, clearing, and commodities trade across regions, they presented greater efficiency and uniformity through transacting. See Fratianni (2006) and Bolt, Frost, Shin, and Wierts (2024). In the early 14th century, the Peruzzi family in Florence operated an extensive banking house, lending long-term credit to monarchs such as Edward III of England and transferring large sums of money through bills of exchange and double-entry bookkeeping. Banks were also established in Venice, where there were a variety of institutional forms primarily support- ing maritime trade, which aided giro banking and the establishment of financial institutions by establishing a central clearing and deposit function behind an institution like the Banco di Rialto (1587), institutionalizing a centralized model of monetary settlement for public banking systems. Together, they contributed to the underpinnings of sovereign finance and commer- cial credit-based systems. Ultimately, they also developed a proto-central banking system in Renaissance Europe. See Lane (1937) and Fryde (1951).

The accumulation of involvements in increasingly complex trading and the enlargement of sovereign borrowing resulted in a movement of trust away from private goldsmiths and merchant banks to state-backed financial institutions. The establishment of the Bank of England in 1694 was momentous: it enabled the state to legally issue debt financed by the state and created the institutions that would form the foundation of modern central banking.

As a public bank subject to parliamentary governance, the Bank of England conferred le- gitimacy to currency issuance by anchoring it in specific rights to state authority and taxation (Desan, 2014).

These institutions developed the infrastructures that enabled liquidity, public borrowing, and regulation of currency circulation. By enabling these emergent systems of public borrow- ing, they moved money away from the world of commodity or contractual assets and firmly into the world of government-backed systems. This allowed for economies of scale and the format needed to develop a stable financial architecture, which created the base for modern monetary systems (Ugolini, 2017).

4.4 Paper-based payment systems: Cheques and giros

Cheques made their appearance in England in the second half of the 1600s in written directives to banks requesting that the banks transfer funds on the writer’s behalf. Cheques reduced the reliance on and need for carrying specie or paper currency to conduct high-value transactions since the value of the transactions fell on the bank or counterparty risk when transacting. In the broad sense, cheques became widespread during the 19th century with the rise of commercial banking and legal reforms that allowed for enforceable and negotiable instruments (Quinn and Roberds, 2008).

Giro systems developed in various forms by the post offices of 19th century Austria and Germany represented account-to-account value transfers without the need for any physical cash. They enabled individuals and firms to coordinate payments through centralized clear- ing ledgers, acting as early forerunners of digital transfer systems. They institutionalized the concept of non-physical payment by offering a trusted, centralized mechanism for value transfer (Hein, 1959).

These systems improved accessibility and user experience with non-physical payment mech- anisms. They also set the stage for the mechanized, institutional payment systems of the indus- trial age, where value transfer increasingly relied on state-supported frameworks rather than physical tokens (Berger, De Haan, and Eijffinger, 2001).

5. Industrial foundations of structured payment mechanisms

5.1 Factory wages and the institutionalization of payroll systems

In the early stages of industrialization, from the mid-18th to the 19th centuries, wage systems changed from an output-based piecework to organized, time-based payment. With factories structured in a way that allowed supervision, workers would be offered hourly and daily wage structures, thus allowing workers more expected incomes from simple wages in what is now seen as wage work. These new wage systems also instilled a sense of temporal discipline, as well as standardized hours of work (Schwarz, 2007).

From the middle of the 19th century, larger factories assumed some systematic approach to wage distributions, and there were issues of documentation. A combination of time books, pay- roll records, and attendance records was viewed as indispensable for tracking workers’ status of labor work intake and wage entitlements. Timekeepers and clerks documented the number of hours worked and wage entitlements, thereby establishing internal payroll systems. These mechanisms helped minimize wage disputes and facilitated the standardization of compensa- tion across occupational roles (Hanes, 1993).

Large industrial businesses in the late 19th and early 20th centuries, particularly in Great Britain, Germany, and the U.S., developed in-house payroll offices. These departments figured wages, paid deductions, regulated payments, and audited internal spending. This would have been representative of the general bureaucratization process taking place in industrial capital- ism (Jacoby, 2004).

In the early 20th century, scientific management began to take hold. Time-motion studies, coupled with performance-based pay systems like premium plans or bonus systems, helped to grow a greater reliance on wages on measurable efficiencies. Standard productivity expec- tations began to sound normal as wages began to consider the eventual implications of labor. This also offered a justification for the pay distinctions between different general workers (Tay- lor, 2023).

Even while wage structures were formalized and payroll accounting became institutional- ized, the whole premise also started a wage-based undertaking for a demand for increasingly stabilized and standardized payment units. The model created in this era served as a frame- work for modern human resources, payroll systems, and labor laws that define and shape em- ployment. As industrial economies expanded, paper currency emerged as the dominant wage medium, prompting the need for standardized systems of printing, verification, and circula- tion. These developments represented the full-scale manufacture and commercialization of banknotes by the late 19th and early 20th centuries (Osterman, 1987).

5.2 The printing revolution and mass production of banknotes

In the early 1800s, banks embraced steel-plate printing, which is how engraving rolls made of steel firmly became the means of transferring engravings reliably to print banknotes and reproduce quality banknotes to complete transactions frequently. This innovation replaced soft copper plates, enabling high-speed reproduction of consistent impressions and significantly reducing plate degradation (Robertson, 2005).

Lathes began to produce complex guillochépatterns – complex, repetitive designs carved in plates that are very difficult and time-consuming to hand forge. In parallel, significant advance- ments in ink formulation introduced new marks and watermarks, enhancing anti-counterfeiting measures (De and Canadiens, 2006).

As flatbed intaglio presses transitioned to rotary-intaglio presses capable of high-pressure printing on dry paper, production became industrialized because these could process larger volumes of sheets with consistent results. This shift effectively delineated artisanal methods from the industrialized processes of banknote production (López-Bosch, 2015).

The central banks and government mints also formed dedicated printing works with indus- trial printing equipment and systems for quality inspection, automatic numbering, and pack- aging. Industrial printing facilities were in operation well into the 20th century, many with added security and custom-built and portable for wartime, and turned out completely printed banknote circuits professionally (Reddy, 1988).

The printing revolution facilitated currency issue in high volumes, at lower marginal costs, and with globally standardized issue with an emphasis on shoring up the security of printing with high production practices. It established structural formalism and architectural rigor in state-backed finance, contemplative of specialized bureaus dedicated only to printing, engrav- ing, and issuing money. Many of the quality assurance and security practices employed at this time are part of processes evidencing central banks today (Reina, 2024).

With increased amounts quoted on printed money during the 19th century, banknotes were interchangeable with each other and more widely accepted, and the growing presence of printed money expedited the settlement of trade and finance. Banks started acknowledging and man- aging the growing volumes of payments, often in cheque and banknote forms, through develop- ing Federal Central clearing practices, laying the groundwork for settlement in clearinghouses.

5.3 Accounting machines and the automation of transaction recording

As the number of financial transactions increased towards the end of the 19th century, so did the increased volume of transactions, which increased the demand for reliable methods of record- ing and settling those transactions. Initially, banknotes were counted to their coin equivalents, marked and folded by the teller to settle the sum. With the advent of mechanical adders and typewriters, counting and accounting became faster and more reliable, less prone to human error, and the automatic recording of transactions made it easier to settle transactions.

In the early 20th century, specialized machines arrived that not only computed but also automatically printed and posted into journals or ledgers – automating the recording of sales, payroll, and other transactions. See Keenoy (1958) and Wilson and Sangster (1992).

By the end of the 19th century, punch-card tabulators were used. These machines, which were originally actuated by Census data, would also be adopted by companies to process pay- rolls, inventories, and financial data and began creating batch processing of business data (Hol- lerith, Couffignal, Dreyer, and Walther, 1973).

Mechanization in accounting was able to speed up the work and lower costs; however, there was a deskilling of the traditional bookkeeping role, moving many tasks into the hands of fe- male clerical workers. This shift in accounting practice not only deskilled manual posting in analytical accounting but also shifted the profession more towards managerial roles (Jedlick- ova, 2020).

Over the decades, machines evolved into computerized and later electronic accounting sys- tems, evolving even more to include early computers that were able to automate cheque pro- cessing and some record-keeping functions. Hence, they became integrated into modern ac- counting with built-in efficiency, accuracy, traceability, and batch processing for transactions (Bendovschi, 2015).

Mechanical and electromechanical systems had been leveraged to achieve very substantial productivity increases in banking in the early 20th century, but they still suffered from the same spatial and temporal constraints. As the world gained greater connectivity and consequently, expectations for speed and security grew, the banking sector turned to new digital technologies. The shift from analog to digital technologies was not merely a shift of technological capabilities but a redefinition of financial infrastructure – characterized by integrated databases, high-speed communications, and the ultimate merger of the internet.

6. Digital infrastructure and the rise of platform-based payments

6.1 From magnetic tapes to electronic funds transfer

The move to electronic payments was initiated in the early 20th century with telegraphic trans- fers, which allowed banks to transmit funds, eliminating the need for the physical movement of currency. The U.S. Federal Reserve launched Fedwire in 1918, allowing interbank settlements in real time through telegraph and later teletype technology to replace the manual clearing that could take days to finalize. See Engel and Hammar (2006) and Leaders and People (2023).

Automated clearinghouse (ACH) systems were developed in the 1960s to handle regular lower-dollar-value transactions, like payroll and utility bill payments, using magnetic tape stor- age and batch processing technology. Also during the 1960s, the Clearing House Interbank Pay- ments System (CHIPS) was developed for interbank transactions with large dollar amounts and was operating globally in the 1970s for large dollar interbank transactions, particularly in the international financial area (Stevens, 1984).

Before the formation of SWIFT in 1973, global messaging between banks was facilitated through various networks, which meant messages between banks were both inconsistent, more prone to security breaches, and unsafe. SWIFT, with communication standards, allowed inter- bank messaging across countries using a centralized means that largely replaced telex with more secure and reliable standards and became the foundation of global interbank service in- frastructure (Scott and Zachariadis, 2012).

Collectively, these advances provided the framework for the modern electronic payments ecosystem as a centralized and accelerated means of infrastructure for domestic or international financial transactions (Panurach, 1996).

6.2 The ATM revolution and card network expansion

The first ATM in the modern sense, which utilized peripheral devices for offline dispensing in tandem with magnetic-stripe cards, was released in the late 1960s. The first ATMs were limited to simply dispensing cash or printing out transaction records. In the early 1970s, some first-generation ATMs began being located at terminals that were connected to a central-host system. This meant that customers had real-time access to their accounts and could complete transactions such as deposits or fund transfers. This shift marked a transition from isolated terminals to integrated, network-based banking infrastructure (Konheim, 2016).

Initially, ATM networks were proprietary, allowing access only to the issuing banks’ cus- tomers. Beginning in the early 1970s, shared networks of ATMs began appearing in various cities that allowed account or customer access to ATM facilities of participating banks nation-wide. By 1990, shared interbank networks were supporting more than ninety percent of all ATM networks, facilitating conveniences and access for consumers (Matutes and Padilla, 1992).

During the 1980s, Visa and Mastercard established branded ATM networks, Plus and Cirrus, respectively, to facilitate access to cash globally. Plus was created in the early 1980s as a coop- erative association of U.S. banks, only later acquired by Visa; it has operated an interconnected network of more than one million ATMs worldwide. Many other networks have emerged in the United States in recent decades, such as STAR and Pulse, which have networks that encompass thousands of separate institutions and millions of ATMs (Kauffman and Wang, 1993).

ATM cards gradually developed into debit cards that offered checkout payments in addi- tion to cash access. This interoperability was crucial to building a seamless consumer payment experience across banking institutions and geographies. Eventually, ATMs transitioned from in-branch installations to widespread, off-premise locations operated by third parties, signifi- cantly broadening access and financial inclusion (Bátiz-Lazo, 2009).

6.3 Rise of private payment platforms and fintech

A significant shift occurred in the late 1990s, when private technology companies began to offer scalable, internet-based financial services that utilized existing banks’ infrastructures without being associated with the banks themselves. One of the first platforms was PayPal, which pro- vided peer-to-peer transfers via email and soon became a pillar product of e-commerce transac- tions. The rapid adoption of consumer behavior indicated that digital wallets might eventually be able to displace traditional financial agents while allowing the transaction to happen with speed and scale and in a similar economic transaction context to existing traditional financial transactions (Soni, 2022).

In this instance of Alipay, China introduced its consumer payments development in 2004 by linking mobile wallets to e-commerce transactions before developing a complete financial ecosystem. They would then reinforce that financial ecosystem with WeChat Pay by connecting the payment transactions directly to social communication. Today, both Alipay and WeChatPay account for the majority of retail payment transactions in China and are an example of the method by which private networks can supplant not just a banking infrastructure but a bank-led infrastructure (Klein, 2020).

Meanwhile, in Kenya, M-Pesa launched in 2007, creating a breakthrough in mobile money transfer via rudimentary handsets and a network of agents. M-Pesa was transformational for financial inclusion, particularly where there was limited or a complete lack of access to formal banking services. Further afield, these models have been successful in various emerging mar- kets in Africa and Asia, on-boarding millions of previously unbanked users (Ndung’u, 2018). By the 2010s, the fintech ecosystem had rapidly blossomed across multiple regions glob- ally, with large tech firms and telecommunications firms entering payments with their giant platforms (Google Wallet, Apple Pay, Venmo, and Cash App), offering consumers peer-to-peer payments and retail-style connections, among their range of data-informed financial products. Countries such as India and Brazil pioneered state-backed, privately managed platforms like UPI and Pix, which facilitated the best banking and e-commerce opportunities and pioneered instant, account-to-account digital payments between payee and payer at scale, sometimes with private or front-end interfaces (Cumming, Johan, and Reardon, 2023).

Collectively, these experiences reduced reliance on state-led banking infrastructure, put competition into the equation, and enabled digital financial service provision outside the for- mal banking system that usually excludes most underserved populations. Most notably, in the Global South, mobile payments technology served to accelerate the pace and inclusion, show- ing how private sector innovation could alter national and cross-border payment systems.

7. From coordination to control: The globalization and geopolitics of payment infrastructure

7.1 International monetary arrangements: From metal standards to fiat

Global payment infrastructures have become increasingly integrated, achieving levels of cross- border technical precision unprecedented in earlier eras. Despite their inherent cross-border nature, modern payment systems remain fragmented because of national, legal and technical barriers which require coordinated solutions. The very structure and design of these platforms may be affected by the impact of national interests, legal regimes and geopolitical conflicts. To- day, the international monetary infrastructure operates not only through the currencies them- selves, but also through the networks that transmit them. Monetary power is increasingly ex- ercised by controlling these financial conduits.

Gresham’s Law, often stated as “bad money drives out good,” illustrates how people tend to hoard or melt down the good coins and spend the debased or clipped coins when coins with different intrinsic values circulate at the same legal tender value. This often occurred in the me- dieval and early modern economy when sovereigns frequently debased the currency to finance a war or to help pay a debt. The result of these policies was the full-weight coinage disappear- ing from the economy, with the steady erosion of the currency unit. In this sense, Gresham’s Law illustrates problems related to monetary regulation, coin standards, and sovereign valua- tion actions that require clear institutional frameworks to maintain confidence in the currency and trust in exchange (Selgin, 2020).

The Classical Gold Standard (1870–1914) marked a high point of a worldwide integrated monetary system, where most of the larger economies pegged their national currencies to gold with fixed exchange rates and an open and expanding space for global trade and investment. The fixed quantity of gold allowed for fixed exchange rates and increased global trade and in- vestments between nations; most importantly, it provided for long-run price stability. In addition, central banks held gold in reserve to back the amount of paper currency they could issue, and they were required to redeem denominations of paper currency into gold upon demand. While the gold standard was meant to provide an anchor of monetary discipline, it tended to impair countries from shaping their responses to domestic economic crises, often resulting in deflationary spirals. When a financial crisis struck, the inflexibility of the gold standard became a burden, and the gold standard was suspended with the outbreak of World War I to meet the large military expenses (Eichengreen and Flandreau, 1997).

The Gold Bullion Standard (adopted by Great Britain in 1925 under Prime Minister Winston Churchill) was a variation on the classical gold standard, where the general public could no longer redeem currency for gold coins, but holders could redeem it for gold bullion. The policy move was also designed to strengthen the role of the British pound as a global reserve cur- rency, as a symbol of Britain’s intention to regain its pre-war financial hegemony. The meaning of this change was to minimize the circulation of gold in the domestic economy while maintain- ing the convertibility of gold for international holders. This restored international confidence in the British pound, as part of Great Britain’s efforts to support its currency during the de- flationary conditions and severe economic instability that followed the First World War. The new gold standard lasted only a short time and was abandoned in 1931, owing to the massive economic pressures of the Great Depression. The most serious problem is the massive capital flight from gold reserves, the speculative attack on the pound, and the soaring level of unem- ployment. Great Britain’s refusal to devalue its excessively overvalued exchange rate or to ease monetary supply in the face of falling prices and incomes has only made domestic deflation worse. Ultimately, the insistence on maintaining gold convertibility proved unsustainable, and Great Britain suspended it to regain monetary-policy autonomy (Officer, 2010).

As WWII’s end was approaching, in 1944, the Bretton Woods system pegged global cur- rencies to the U.S. dollar, which was immutable to gold at $35 per ounce. This system was a fixed exchange rate system with the target of postwar stability. By the late 1960s, however, con- tinued trade deficits and inflation in the U.S. caused a loss of confidence in the dollar and the dollar’s convertibility into gold. Pressure escalated for Eurodollar markets – creating a parallel liquidity outside Federal Reserve authority and an easier capacity to challenge U.S. monetary discipline. During heightened monetary tensions over eurodollar creation, French president Charles De Gaulle called on gold for his excess dollars in 1965, denouncing the unreliability of dollar dominance in the international monetary system and explaining that the scenario of excess dollars resulted in disproportionate advantage to the U.S. The Swiss National Bank and dozens of others, including the International Monetary Fund, quickly began to bring dollars back to the U.S. in return for gold, and the U.S’. gold reserves were diminished. This crisis of confidence highlighted the inherent contradiction of the Triffin Paradox (1960): to supply global liquidity, the U.S. had to run ongoing deficits, but these deficits led to a drop in foreign confidence in the dollar’s gold backing. The more dollars the world held, the less credible the U.S. promise of convertibility. In 1971, President Nixon decided to suspend the convertibility of gold for the dollar; this effectively ended the Bretton Woods system and began an era of floating fiat currencies (Bordo, 1993).

After the Bretton Woods system fell apart and the world transitioned away from gold com- mitments, a new form of international monetary regime emerged: fiat currencies – currencies that were supported by the authority of their sovereign state to impose taxes and the public’s faith. The transition also reorganized the global payments system – not only through the adop- tion of fiat currencies, but also by replacing fixed exchange rates with floating regimes, which were perceived as more effective shock absorbers for national economies. With the world ex- periencing floating currencies, the 1980s exhibited escalating volatility in exchange rates and trade challenges, primarily from the already addressed issue of the U.S. dollar’s overvaluation. At this point, many economists were expressing concerns about global trade. The Plaza Accord of 1985, where the G5 nations (the United States, Japan, West Germany, France, and the U.K.) cooperatively intervened in the global monetary system with a request to depreciate the dollar to protect trade dynamics. With this came an acceptance of managed fiat diplomacy, where instead of anchoring in metal, macro-coordination and central bank intervention brought us into a new chapter of monetary intimacy based on collective political will and convergence of economic policy. See Durani (2015), Bergsten and Green (2016), and Dapp (2021).

As fiat systems displace metal-backed currencies, the need for reliable institutional clear- inghouses has opened the door for them to handle the increasing complexity of transactions.

7.2 Emergence of clearing houses and inter bank settlements

During the period of rapid growth in trade, merchants and bankers all began to settle payments in central locations rather than making slow, bilateral transactions with merchants physically carrying coins or personal cheques from one bank to another (Norman, Shaw, and Speight, 2011).

By the mid-18th century, London established the first formal clearinghouse, which provided a method of centralizing information from member banks to deposit the cheque or bill to one location, determine net positions, and settle the differences. Other municipalities soon imple- mented similar exchanges or clearinghouses, such as the Boston Suffolk System in 1818, fol- lowed by the establishment of the New York Clearing House in 1853, which immediately fa- cilitated the exchange of millions in payments every day. Those exchanges provided a local exchange for the transfer of the cheque and the bill. The member bank would simply drop the cheque or bill into specific boxes located at the clearinghouse. Clerks would count the cheques and bills that came in and out, and only the net balances would be transferred, significantly reducing the amount of specie or cash that would be required to settle among various banks. See Loader (2019) and Cannon (2024).

The clearinghouses began to act as quasi-regulatory institutions, establishing reserve re- quirements, auditing members, and issuing loan certificates during a crisis, which ultimately bolstered trust in the payment system (Johnson, 2011).

In the middle of the 20th century, as telegraphy and computer technology became more reliable, clearing procedures between banks changed with the involvement of central banks. These systems evolved into RTGS (Real Time Gross Settlement) and automatic netting systems.

This paved the way for today’s fast and secure transactions. Global financial infrastructures such as CLS (Continuous Linked Settlement) mitigate settlement risk by settling both sides of foreign exchange transactions simultaneously (Tompkins and Olivares, 2016).

As settlement systems between banks have become more complex, particularly with the emergence of centralised institutions and time-critical settlement protocols, there has been a growing demand for accurate, high volume accounting. The speed and reliability of manual bookkeeping and paper-based procedures could no longer keep up with the operations of ever more complex financial systems. The operational pressure of the new clearing system eventu- ally led to the digital transformation of government payment systems through the use of RTGS.

7.2 Digitization of central bank systems and RTGS

Initially, in the context of payment modernization, transactions of a high value were settled by means of deferred net settlement systems. This involved pooling of inter-bank payments and settlement of net positions at the end of each day, which, though effective, creates systemic risk, as a failure by one institution to meet its net final settlement obligations could disrupt the entire settlement chain (Allsopp, Summers, and Veale, 2009).

In order to manage this risk, central banks implemented Real-Time Gross Settlement (RTGS) systems from the 1980s onward. RTGS systems allowed for high-value payment settlement to occur immediately and individually, thus limiting counterparty risk and general systemic fi- nancial risk. In short, payments became final and irrevocable, leaving transacting banks with much more accurate confidence about inter-bank transactions and settlements (Bech and Ho- bijn, 2006).

By the 2000s, RTGS systems were fairly ubiquitous across advanced economies, and emerg- ing markets were beginning to implement RTGS systems in earnest. This was not only a tech- nological shift but also a structural shift for the management of liquidity, credit, and risk at the national economy level. Because they had better control over intraday liquidity, central banks were able to be more proactive in managing systemic risk (O’Hara, 2005).

The RTGS system also aided monetary policy transmission by allowing a more precise as- sessment of interest rate effects and minimizing delays by settling transactions promptly rather than waiting until the end of the day, particularly in government securities and central bank- executed transactions. Standardized messaging formats and the expanded adoption of RTGS technology for other non-depository institutions in the recovery phase of developing market so- lutions further integrated these major components into a broader financial ecosystem (Mañalac, Yap, and Torreja Jr, 2001).

In hindsight, the advancement of RTGS systems marked a watershed moment in banking: national payments infrastructures were more predictable, visible, and safer than before; this was the precursor for globally coordinated instantaneous payments through financial flows in the digital age (Bech, 2007).

As RTGS systems replaced traditional clearinghouses, they quickly turned the speed and finality of transfers and payments into a strategic advantage for banks. However, the fact that RTGS systems exist in a national context raised several questions about global coordination and emphasized the urgent need for interoperability between RTGS systems.

7.4 Interoperability, data, and systemic risk

With the expansion of digital payments, it became apparent that interoperability – the ability for multiple platforms, devices, and types of institutions to communicate and transact easily together – would be essential. As countries moved to bring together mobile apps, banks, and fintech to develop near real-time infrastructure, central banks and regulatory bodies advocated for interoperability protocols and harmonized standards. See Boar, Claessens, Kosse, Leckow, and Rice (2021) and Akoguz, Roukny, and Vadasz (2025).

To manage the fragmented nature of payments messaging and to transfer more data be- tween systems, international systems began to implement ISO 20022, a standardized financial messaging standard. Adoption in central bank RTGS systems (e.g., Fedwire, TARGET, and CHIPS) improves operational efficiencies, data quality, and regulatory oversight across domestic and cross-border payments (Major and Mangano, 2020).

Greater connectivity introduces new vulnerabilities into the system. A failure of one institu- tion or platform may create a ripple effect of liquidity stress and operational incidents through- out the network. Systemically important institutions are becoming too interconnected to fail, with network effects amplifying financial contagion. The transmission of more financial data also increases the risks to security and privacy associated with data interchange between sys- tems. In this new paradigm, the established regulations, reliable infrastructure, and monitoring capabilities are key controls that will provide and support resiliency (Wang, 2017).

Given that risks are ever-present, the BIS, G20, and other international organizations are working together to advance frameworks for international payments oversight, interoperability, and stability (Lentzos and Rose, 2009).

Thus, interoperability enabled rapid cross-border payments and exchanges between pay- ment systems, but it also harbored systemic and cyber risks and made the payment infrastruc- ture an area of vulnerability and geopolitical control.

7.5 Geopolitical control and the weaponization of payment systems

Once thought neutral, the global financial infrastructure has become an important tool of state- craft. For example, payment messaging systems such as SWIFT serve as strategic hubs for pay- ments by countries – especially the U.S. and its allies – that want to use them as leverage to gain access to the global financial system. This was clear when Iran left SWIFT in 2012. Then, when Russia invaded Ukraine in 2022, SWIFT restricted access to the main Russian banks that were under the umbrella of SWIFT. The provision of payments messaging triggered major economic disruption, capital flight, and currency collapse across the entire Russian economy. See Majd (2018) and Tulun (2022).

This weaponized interdependence is based on structural power in the network. If control over the infrastructure is power, controlling something that is the basis of global financial struc- turing should bring terrific leverage. With the U.S. dollar and its dominance of SWIFT messaging and correspondent banking, the concentrated control functions as a single-keyveto, empow- ering dominant states to unilaterally halt financial flows globally (Crawford, 2025).

Financial exclusion drives targeted states to construct parallel systems. Russia built a mes- saging platform (SPFS) and a domestic card network (Mir). Meanwhile, China built a Cross- Border Interbank Payment System (CIPS) to reduce its reliance on both Western financial sys- tems and the dollar (Fan and Voronkova, 2024).

Consequently, strategic exclusion through SWIFT and equivalent dollar-clearing has sped up de-dollarization measures. Countries such as China, India, and ASEAN countries are mov- ing quickly to promote trades in local currency-based settlement and create direct payment corridors to circumvent the dominated international payment infrastructure. Central banks are also diversifying reserves into gold, yuan, and other regional currencies. See Burke (2024) and Saaida (2024).

These developments show us that our payment systems today are no longer neutral but are instead strategic political tools that are changing the landscape of power globally by creating new connections that can later be excluded.

8. Cryptocurrencies, digital identity, and thebattle for financial control

8.1 The genesis of crypto: Historical distrust and the monetary counter-narrative

The introduction of Bitcoin in 2009 as a new form of technology, in the wake of the Global Financial Crisis of 2007–2008, was not only a technological advancement, but also a systemic critique of centralised financial management. The design was deliberately identified from a structural position as a decentralised alternative that removed reliance on traditional financial intermediaries such as banks. This decision was a deliberate response to documented failures of central banks and regulators – who introduced moral hazard, embraced unprecedented risks, and shaped policy through opaque inflation-management frameworks (Segendorf, 2014).

Cryptocurrency is a digital asset that trades on a decentralized network, typically using the technology of blockchains, where transactions are secured and verified by an encryption algorithm. Cryptographic algorithms verify the legitimacy of the currency in a decentralized way, without central management. Blockchain assets use a form of decentralized algorithmic trust that challenges the sovereign monopoly on currency creation by codifying financial rules and verifying their legitimacy.

This financial innovation echoes past moments in monetary history, such as the 19th century Free Banking Era in the United States and Scotland, when privately issued currencies prolifer- ated in some areas – a system marked by fragmented currencies and episodic financial instabil- ity – thereby generating little stability in the absence of a central monetary authority. In addi- tion, when countries experience sovereign default or hyperinflation, communities have found alternative stores of value or means of exchange outside of official means (Fessenden, 2018).

Historically speaking, cryptocurrencies are not exceptions to attempts to circumvent the ac- cepted regime of money arrangements. They represent only the latest innovation of market- based solutions to modify the nature of payments as a result of institutional failures. Thus, they are a digital retake of the historical counter-narrative on money, which emphasizes auton- omy, transparency, and resistance to centralized control (Afzal and Asif, 2019).

8.2 Central bank digital currencies: Digital reinvention of monetary authority

Central bank digital currencies (CBDCs) are digital forms of government currency that are is- sued and regulated by a country’s central bank. Technically, CBDCs are government-backed digital tokens or account-based systems based on either an approved Distributed Ledger Tech- nology (DLT) or centralized databases. Unlike decentralized cryptocurrencies, CBDCs are directly and fully backed by the issuing authority and are intended to serve as legal and accept- able payment instruments, including programmed functions for settlement, traceability, and monetary control (Ward and Rochemont, 2019).

CBDCs present a government response to the growing influence of the decentralized climate of cryptocurrencies. Where crypto denotes a grassroots distrust of central authorities, CBDCs demonstrate an institutional counter-response, reaffirming sovereign monetary authority and regulating currency (Yusifov, 2024).

This evolution of the monetary authority follows a streak of innovations that ranges from ancient coinage regimes to modern programmable currencies, to orderly central banks under fiat conditions, to programmable state currencies today. Each of these systems is a current adaptation to the mutating state of money (Auer, Branzoli, Ferrero, Ilari, Palazzo, and Rainone, 2024).

Local authorities are seeing CBDCs as one way to design control for states over the currency. Among the large economies, China’s e-CNY is the most developed CBDC, since it enables the central bank to track and control transactions in real-time. The currency is being managed in real time at the national bank regulating level, permitting not simply management of the cur- rency but top-down management of all economic activity in a jurisdiction. India’s digital rupee emanates from the directionality toward inclusion and immediate state transfers to individuals, producing efficiencies in state welfare disbursements, managing and streamlining cash transac- tions, and enhancing monitoring and tracing. The European Central Bank positions the digital euro as a potential state option to respond in some way to the personal data and innovation risks posed by faster-growing private and foreign-dominated digital payment systems, and it contributes to states’ monetary sovereignty. See Mooij (2021), Ozili (2023), and Li (2025).

Thus, central bank digital currencies (CBDCs) represent more than just a technical advance- ment – they are a mechanism for states to reclaim their monetary power within a digitally dom- inated global economy. Just as we have witnessed the historical evolution from commodity and asset-based systems to fiat systems, the provision of CBDCs signifies a concerted effort to respond to a moment of financial decentralization by offering legitimacy and state-coerced trust in the money supply.

8.3 Cryptocurrencies as parallel economies: Disintermediation, autonomy, and the rise of decentralized finance

Since the early days of Bitcoin, blockchain technology has evolved from a mechanism for the pure exchange of digital currencies to a foundation for a wide range of financial innovations and governance structures. The introduction of Ethereum and the establishment of smart con- tracts, i.e., self-executing contracts that execute transactions once predetermined conditions are met, was a significant change (these contracts eliminated the need for intermediation). This made decentralized autonomous organizations (DAOs), emergent, rule-based systems on the blockchain that allowed open collectives to operate outside the control of governments, a vi- able entity. This was a huge step forward beyond peer-to-peer exchanges to self-governing and fully autonomous systems for coordinating financial activity. See DuPont (2019) and De Vries (2023).

This is centralized disintermediation in action. Cryptocurrencies function autonomously without traditional financial infrastructures – they do not require SWIFT networks, correspon- dent banking arrangements, or capital controls, and they enable the transfer of assets and the execution of payments that are (at least partially) independent of traditional regulatory struc- tures. This autonomy is not only technical but also political and represents an attack on the centralized authority of traditional banking institutions (Gomaa, 2018).

The emergence of Decentralized Finance (DeFi) has taken this independence even further. DeFi protocols are able to replicate traditional financial services such as lending, borrowing, insurance, and trading, but they do so in a way that is free from institutions or other interme- diaries. They also utilize protocols and mechanisms such as liquidity pools, which let users deposit token pairs into smart contracts, enabling decentralized trading without intermediaries, with rewards tied to trading volume and usage. By using collateralized smart contracts, lenders can safely lend and be automatically liquidated when the price of their asset falls below a certain value, creating a self-governing financial ecosystem. In fact, in many cases, DeFi is more than a replacement for the traditional system; it seeks to replace it completely (Arslanian, 2022).

These bureaucratic mechanisms are particularly useful in crisis-hit countries like Venezuela and Zimbabwe, where communities often turn to crypto-assets or stablecoins to escape hyper- inflation and capital controls. Not only are these alternatives a store of value, but they are also more independent of official pathways, largely relying on the black market exchange rate and exposing their users to currency risk. Accessing global markets and financial services is usu- ally not realistic. Where traditional banking does not work or is unavailable, unbanked people often have only mobile crypto wallets as a lifeline, with the use of a secure mobile medium al- lowing users to save and transfer money and use their money as part of the unbanked economy (Mumford, Sampson, and Shires, 2024).

However, the harmful threats associated with decentralized power are not insignificant. For example, there are extreme consequences that arise from a largely unregulated space that can lead to various negative effects, with each type of systemic volatility, token fraud, and smart contract code errors, as well as errors in the creation and understanding of models, playing their own role. However, global regulatory responses to these innovations have largely been reactive rather than proactive, often lagging behind the speed of technological change. This delayed response has left gaps in oversight, increasing exposure to systemic vulnerabilities such as smart contract exploits, asset volatility, and speculative bubbles (Li and Huang, 2020).

8.4 Digital identity and the financial self: From ledgers to biometric control

The concept of financial identity has evolved from simple accounting-based record-keeping systems to a modern system of multi-layered authentication and verification. In the past, finan- cial transactions relied on the trust of the community and detailed records in written accounts.

With the formalization of banking came the bureaucratization of identity through documents, signatures, and requirements for Know Your Customer (KYC). Digital identity has evolved in an age of databases, electronic communications, biometric data and algorithms (Tabaku and Duci, 2024).

Modern digital identity infrastructures, such as the linking of biometric identities with ac- cess to public and financial services in India (Aadhaar), in Nigeria (NIN), or the social credit- linked financial ID systems in China – extend government control and reach by linking existing biometric data with new access points to public and financial services. When institutions pro- mote digital identity systems, they do so with the idea of greater inclusion and efficiency, while scholars have criticized such systems for their features that enable surveillance, coercion, and exclusion. This reveals an underlying tension between administrative efficiency and surveil- lance risks – while such infrastructures improve targeting and delivery, they may also erode individual privacy and autonomy. In the CBDCs’ pilot projects, digital identity is not only an entry point but also a programmable boundary and behavior control mechanism. The financial self, previously defined only by control over capital, is increasingly organized through algorith- mic scoring, data traces, and biometric identification. See Salmony (2018), Mir, Kar, Gupta, and Sharma (2019), Wang and De Filippi (2020), and Okunoye (2022).

The boundary between identity and money is moving away from the established conven- tions of mainstream banking. Banks used to be seen as an accounting mechanism for financial orientation. Today, the focus has shifted to forms of active control. Economic life for individ- uals, corporations, and nations is now differentiated by layers of identity that are coded and enforced by the state. This may lead to more far-reaching changes in governance in relation to civil liberties and digital rights (Feher, 2021).

8.5 The global currency race: Geopolitical realignment through digital means

The current “currency race” is an increasing monetary competition, i.e., the competition between countries or institutions for the world’s favorite currency for global trade and savings in the digital dimension. This competition is no longer about interest rates or reserves, but about a different race: it is about who can build a faster, more secure, and widely accepted financial infrastructure. The race to create a digital infrastructure in every market is now an important way to reposition geopolitically. Currency influence today no longer depends on banks sitting on physical gold or silver. Instead, it is about utilizing digital networks and the ability to control transaction data and create and hold secure assets – financial instruments (government bonds, trusted digital currencies, etc.) that are safe, low-risk, and widely accepted in uncertain times (Aliyeva, 2025).

Dollar trading relies on infrastructure, including export invoicing and correspondent bank- ing systems, as well as the expansive Eurodollar market. However, the tightening of U.S. sanc- tions and the de-dollarization campaigns have exposed strategic vulnerabilities for countries that rely on dollar-dependent payment corridors. Many countries are beginning to develop replacement financial infrastructures that include improvements to national and regional real- time gross settlement (RTGS) systems, linkages to facilitate instant cross-border payments, channeling renminbi payments through one of the cleared renminbi banks or messaging sys- tems, frameworks for regional settlements in Asia, Africa, and Latin America, and new state- based card or messaging systems in parallel with existing global networks such as SWIFT and Visa. See Novak (1979), Buckley, Arner, Zetzsche, Lammer, and Gazi (2022), Pistor (2022), and Taylor (2025).

Multi-CBDC and wholesale pilots are signs that states will no longer simply digitize do- mestic monetary units and move on. Rather, they appear to be redesigning the architecture of cross-border liquidity systems to enable atomic, cross-currency settlement across national borders. From a strategic perspective, these projects aim to reduce friction in foreign exchange trading, reduce reliance on dollar intermediaries, improve surveillance capabilities against il- licit financial flows, and re-energize sovereign preference for transactions in selected currency areas. At the same time, CBDCs in large economies want to localize domestic payments in a sovereign, programmable way to create the technical infrastructure for subsequent internationalization (Sanz Bayón, 2025).

Stablecoins and tokenized deposits typically reinforce the dollar’s reach by providing dollar liquidity to digital ecosystems. From another standpoint, local or commoditized tokens seek to excise regional commerce from the established reserve hierarchy. This establishes a two-sided competition – the state up against decentralized architectures and traditional reserve currencies up against extant digital blocs (Fantacci and Gobbi, 2024).

Digital identity and data management have proved to be game changers: control of authen- tication, custody metadata and transaction analytics could bring regulatory and intelligence benefits. Although this is good news, there are pitfalls to be avoided – fragmentation into com- peting standards, interoperability gaps, and regulatory arbitrage can lead to system complexity and liquidity silos (O’hara and Hall, 2018).

The transition to a global currency race is not done with the flip of a switch, but it is a gradual transition to a multipolar world in which no single currency has the upper hand. And money, as we know it, has become diffuse, existing only for a select number of strong economies supported by credible institutions and technological infrastructure. In this world, credibility, convertibility, and connectivity are more important than simple reserve strength. The ability to shape financial networks, set standards, and create trust will determine which currencies and systems will determine global value flows in the future.

9. Conclusion: What is next for money and payments?

Money and payments developments have progressed from barter and metal currencies to in- stitutionalized financial infrastructures and algorithmic digital assets. This long-term trend reflects the interaction of trust, state power, and technological progress in the design of mone- tary systems. Historically, innovative forms of currency transfer between empires and markets have emerged to address problems of economic coordination, institutional legitimacy, and so- cial integration. The rise of central banking, followed by the gold standard and eventually fiat money, redefined national sovereignty by centralizing monetary authority and institutionaliz- ing the control of the economy. In the 20th century, electronic payments became easier thanks to infrastructures like SWIFT, credit cards, and Internet banking, deepening financial global- ization and creating new institutional dependencies. In recent years, the emergence of central bank digital currencies (CBDCs) reflects a resurgence of effort among nation-states to main- tain control over changing monetary systems that have come to be influenced by digitization, diminishing physical cash, and pervasive data practices promoting surveillance in ways that could undermine individual privacy.

At the same time, cryptocurrencies have typified decentralized money as a class of assets that are conceptually and structurally distinct from state-backed forms. Bitcoin, Ethereum, DeFi (decentralized finance), and other technical innovations represent not only a new technology but also an alternative monetary imaginary that challenges traditional intermediaries to create programmable, border-less, and trust-minimized forms of financial engagement.

The trajectories will not be a one-way swap nor a single-direction transition; one could expect systems to overlap with one another. These emerging hybrid ecosystems, made up of state- backed digital currencies, decentralized payment networks, and banking services operating on privately owned financial platforms, will coalesce in complex inter-relational ways that raise new issues related to privacy, governance, access, and systemic risk.

As payments are mediated by software protocols, identity schemes, and geopolitical posi- tioning, the very structure of money will become a battleground. So the next iteration of finance will not be about efficiency or innovation, but rather about the struggle for monetary authority in a fragmented, increasingly digitized, and globalized space.

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