How Technology Is Transforming Capital Flows and Redefining Currency Dominance – Thailand Business News

The global financial system is undergoing a seismic shift. Emerging technologies like stablecoins, asset tokenization, and decentralized finance (DeFi) are not only accelerating cross-border capital flows but also challenging traditional notions of currency dominance. For Thailand and its regional neighbors, these changes present both opportunities and risks that demand strategic foresight.

Executive Summary

The global financial system is in the midst of a profound transformation, driven by an accelerating convergence of technology, finance, and geopolitics. This report finds that new technologies, including Distributed Ledger Technology (DLT), Central Bank Digital Currencies (CBDCs), stablecoins, and Artificial Intelligence (AI), are not merely optimizing existing processes; they are enabling the emergence of a new, multipolar financial order. This reordering is characterized by a fundamental tension between the pursuit of economic efficiency on one hand, and the assertion of national sovereignty and security on the other.

On the front of efficiency, technologies are dismantling the traditional correspondent banking model. DLT-based solutions are significantly reducing the high costs, delays, and opacity that have long plagued cross-border payments. The private sector, through innovations like stablecoins and fintech platforms, is creating parallel financial systems that offer faster, cheaper, and more inclusive alternatives to legacy infrastructure. Simultaneously, AI is revolutionizing capital flow analysis and risk management, although its inherent opacity and potential to exacerbate market volatility introduce a new class of systemic risk.

From a geopolitical standpoint, this technological shift is being leveraged by nation-states to challenge the established dominance of the U.S. dollar and Western-led financial systems. Countries are developing alternative payment infrastructures, such as China’s Cross-Border Interbank Payment System (CIPS) and Russia’s System for Transfer of Financial Messages (SPFS), as strategic tools to facilitate de-dollarization and evade sanctions. The rapid development of sovereign digital currencies (CBDCs) by over 100 countries further underscores this global race for monetary autonomy. This is particularly evident in collaborative projects like mBridge, which aims to create a sanctions-resistant alternative to the U.S.-supervised financial system.

This strategic competition has led to a bifurcated regulatory landscape, with the United States prioritizing private, dollar-backed stablecoins while actively opposing a government-issued CBDC, in contrast to the European Union’s embrace of a digital euro. This philosophical divide, rooted in concerns over privacy and state control, risks a further fragmentation of the global financial system along geopolitical lines. The report concludes that the future is not a simple replacement of the old order but a more complex, multi-layered system where efficiency and geopolitical strategy are inextricably linked.

The Nexus of Technology, Finance, and Geopolitics

The international financial system, for decades anchored by the U.S. dollar’s role as the global reserve currency and a centralized network of correspondent banks, is undergoing a fundamental restructuring. This shift is being catalyzed by a suite of disruptive financial technologies, collectively known as fintech, that are penetrating the foundational layers of global commerce and capital movement. The traditional architecture, defined by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and a complex chain of intermediaries, is increasingly being supplemented—and in some cases, challenged—by new, digitally native systems. This report analyzes how technological advancements are reshaping the mechanisms of cross-border capital flows and, in doing so, are sparking a geopolitical contest over currency dominance and monetary sovereignty.

The core of this disruption lies in several key technological pillars. Distributed Ledger Technology (DLT) and the public and private blockchains that it supports provide a decentralized, tamper-proof record-keeping system that can enable secure and transparent transactions.¹ Building on this foundation are two distinct types of digital currencies: stablecoins, which are private digital currencies typically pegged to a stable asset like the U.S. dollar, and Central Bank Digital Currencies (CBDCs), which are digital equivalents of a nation’s fiat currency issued and controlled by its central bank.³ Concurrently, the transformative power of Artificial Intelligence (AI) is being applied to automate, analyze, and secure financial operations, offering capabilities that were previously unattainable.⁵ These technologies, individually and in concert, are driving a re-evaluation of the core principles of international finance, from transaction speed and cost to regulatory oversight and national control. The ensuing report examines the multifaceted impact of these innovations, detailing their role in enhancing efficiency, facilitating new geopolitical strategies, and introducing novel risks to the global financial landscape.

The Transformation of Capital Flows: From Legacy to Digital Rails

The most immediate and tangible impact of technology on global finance is the dramatic improvement in the efficiency of cross-border capital flows. For decades, the movement of money across borders has been a slow, costly, and opaque process, primarily due to a reliance on a fragmented correspondent banking system. New technologies are providing a compelling alternative, offering speed, cost reduction, and transparency that were once considered impossible.

The End of Correspondent Banking as We Know It

The traditional correspondent banking network, a cornerstone of international finance, operates through a complex chain of intermediary banks that facilitate the transfer of funds between institutions in different countries.⁶ This multi-layered process often results in significant delays, with settlements taking several days to clear, and high transaction fees that can range from a few percentage points to as much as 6-7% of the transfer amount.¹ For businesses, these delays tie up working capital and fragment liquidity, creating cash flow pressures.¹

Distributed Ledger Technology (DLT) offers a direct solution to these pain points. By enabling a single, integrated process, DLT can eliminate the complex chain of intermediaries, thereby reducing transaction costs by an estimated 40% to 80% and allowing for near-instant settlement within seconds.¹ This allows for a direct, peer-to-peer flow of funds, which significantly improves cash flow for businesses and allows for the quick reinvestment of capital.¹ Furthermore, because the entire transaction is recorded on a shared ledger, both the sender and recipient can monitor its status in real time, dramatically increasing transparency and predictability.¹

A concrete example of this is the UBS Digital Cash pilot program. Developed on a private, permissioned blockchain network, this system enables instant processing of cross-border payment instructions, addressing the intraday liquidity challenges faced by multinational companies.¹ The final settlement is executed automatically via smart contracts, which are triggered when predefined conditions are met, ensuring security and speed.¹ The pilot, which involved transactions in multiple currencies, was announced as a success in November 2024 and is designed to eventually integrate with national digital currency initiatives.¹ The success of such private sector initiatives demonstrates a key point: a significant portion of the technological transformation in finance is driven not by geopolitics, but by the straightforward economic rationale of improving efficiency and reducing costs for clients, regardless of the broader monetary system.

Stablecoins and Fintech: The Private Sector’s Response

While large financial institutions are innovating from within, the private fintech sector is creating parallel systems that operate outside the legacy banking infrastructure. Stablecoins, in particular, are emerging as a powerful force in cross-border payments and remittances.³ Unlike volatile cryptocurrencies, stablecoins are pegged to a stable asset, typically a fiat currency like the U.S. dollar, combining the speed and transparency of blockchain with the reliability of traditional money.³ This allows for instant, 24/7 transfers at a fraction of the cost of traditional methods, with fees often as low as 0.5-3%.³

🌐 Stablecoins: A New Payment Infrastructure

Stablecoins—digital currencies pegged to fiat assets like the US dollar—are increasingly used for international transactions. Operating on blockchain networks, they offer faster, cheaper, and more transparent cross-border payments compared to traditional banking systems.

• Thailand’s Opportunity: With its robust fintech ecosystem and growing digital economy, Thailand could benefit from stablecoin adoption, especially in remittances and trade settlements.
• Risks to Watch: Unregulated stablecoin flows may bypass local banking systems, undermining monetary policy and exposing the financial sector to volatility.

The real-world application of stablecoins is most pronounced in corridors where traditional payment rails are expensive or unreliable. In Latin America, stablecoins provide a lifeline against inflation and capital controls, helping individuals and businesses preserve and move value without excessive fees or currency volatility.⁷ In Sub-Saharan Africa, they address a critical need for financial inclusion by enabling faster and cheaper transfers in a region with limited banking access.⁷ For B2B and freelance payments from Asia to the U.S. and EU, stablecoins offer a way to get paid quicker and avoid the clearing delays and complex foreign exchange conversions that often plague international trade.⁷

The defining characteristic of this private-sector movement is that it is fundamentally bypassing the traditional banking system. Stablecoins do not require a bank account; all that is needed is internet access and a digital wallet.³ This creates a parallel financial system that disintermediates traditional institutions, allowing small businesses and individuals to transact globally with unprecedented ease. This trend is complemented by broader fintech innovations, such as the use of AI to automate trade finance documentation and credit provision. For instance, companies like Traydstream use AI to check trade paperwork for errors and compliance issues, a process that is typically costly and time-consuming when done manually.⁸ The ability of these technologies to automate and streamline processes significantly improves cash flow management and reduces the time businesses have to wait to get paid.⁸

AI in Financial Monitoring: A Double-Edged Sword

Beyond its role in streamlining payments, Artificial Intelligence is increasingly becoming a critical tool for analyzing and monitoring the massive volume of data associated with global capital flows. The interconnectedness of global financial markets has led to a surge in cross-border capital, including destabilizing “hot money” flows.⁵ AI and machine learning techniques, such as Recurrent Neural Networks (RNNs) and Graph Neural Networks (GNNs), are uniquely capable of identifying subtle patterns and complex relationships indicative of these movements, providing a more robust early-warning system than traditional methods.⁵ AI is also proving to be a powerful asset in the fight against illicit finance, with AI-powered transaction monitoring models replacing manual, rules-based approaches.⁹ These systems can detect two to four times more confirmed suspicious activity and eliminate over 60% of false positives, allowing institutions to focus on high-risk, actionable alerts.⁹

🏦 Tokenization and Capital Mobility

Tokenization allows real-world assets—stocks, bonds, real estate—to be represented digitally and traded on programmable platforms. This innovation could democratize access to global capital markets and reduce friction in cross-border investments.

• Regional Impact: ASEAN markets, including Thailand, could see increased foreign participation in local assets if tokenized platforms gain traction.
• Policy Challenge: Regulatory frameworks must evolve to ensure investor protection and prevent illicit flows.

However, the widespread adoption of AI introduces a new layer of systemic risk. While AI can make markets more efficient, it can also make them more volatile and opaque.¹⁰ The ability of AI to instantly process large amounts of data and generate trading signals faster than any human can lead to higher trading volumes and a risk of “herd-like selling” in times of stress.¹⁰ The increasing reliance on non-bank financial intermediaries like hedge funds and proprietary trading firms, which are generally more agile and subject to fewer regulatory constraints than traditional banks, could further concentrate risk in a less transparent segment of the market.¹⁰ This raises concerns about the potential for AI-driven “flash crashes” and other unforeseen events. While blockchain technology is lauded for its transparency and traceability, the complex, often non-explainable outputs of AI models introduce a new dimension of opacity. This creates a critical challenge for regulators and policymakers, who must find a way to monitor a system where the very tools used for analysis are themselves difficult to understand.

Redefining Currency Dominance: The Geopolitical Contest

While technology is driving a push for efficiency, it is also a powerful new tool in the geopolitical arena, where it is being used to challenge the post-World War II financial order anchored by the U.S. dollar. The perceived “weaponization” of the dollar through sanctions has spurred a strategic race by rival nations to develop alternative financial infrastructures and assert monetary sovereignty.

💵 The Dollar’s Digital Reinforcement

Most stablecoins are pegged to the US dollar, reinforcing its dominance in global finance. As these digital dollars circulate globally, they amplify the dollar’s “exorbitant privilege,” potentially crowding out local currencies.

• Thailand’s Currency Sovereignty: Widespread use of dollar-backed stablecoins could lead to partial dollarization, complicating monetary policy and exchange rate management.
• Fiscal Implications: The privatization of seigniorage—profits from issuing currency—may shift revenue from governments to private issuers, impacting national budgets.

The Challenge to SWIFT

For decades, the U.S. dollar has been the cornerstone of the global financial system, its dominance underpinned by the efficiency and reliability of traditional payment systems like SWIFT.¹¹ However, the use of these systems to enforce sanctions and exert economic pressure has motivated countries to seek alternatives.¹¹ This has led to the development of new, state-led payment systems that aim to reduce reliance on the U.S. and its allies.

China’s Cross-Border Interbank Payment System (CIPS) is a prime example. While it is often seen as a rival to SWIFT, CIPS is fundamentally different. SWIFT is a secure messaging network that facilitates communication between over 11,500 financial institutions in more than 200 countries, while CIPS is a clearing and settlement system for yuan transactions.¹³ CIPS’s primary objective is to internationalize the Chinese yuan, enabling direct payments and onshore settlement and bypassing the need for intermediary banks and the U.S. dollar.⁸ Despite its rapid growth—with its annual volume rising 43% to over $24 trillion in 2024 and a total of 1,683 participants as of May 2025—CIPS still relies on SWIFT for a large proportion of its messaging, particularly for transactions between banks that are not directly connected to the system.¹⁴

Russia’s System for Transfer of Financial Messages (SPFS) was created as a direct response to a threat by the U.S. to disconnect Russia from SWIFT in 2014.¹² As of Q3 2023, SPFS had grown to include 550 organizations, with 150 from 16 foreign countries, and there have been discussions of integrating it with China’s CIPS to create a joint system for sanctions evasion.¹² The U.S. has responded by warning that institutions joining the SPFS would be subject to aggressive targeting.¹² While SPFS is seen as a “last resort” rather than a full replacement for SWIFT, its existence and growing membership, as well as the push for a CIPS-SPFS link, highlight the strategic importance of building parallel financial systems.

The following table provides a comparative overview of the three major global financial messaging and payment systems, underscoring the fragmented and multi-front nature of the challenge to the established order.

Table 1: Comparative Analysis of Global Payment Systems

CBDCs: A Tool for Monetary Sovereignty and De-dollarization

The most direct challenge to existing currency hierarchies is the rapid development of Central Bank Digital Currencies (CBDCs). As of late 2024, over 100 countries are exploring a CBDC, viewing it as a way to digitize their sovereign currency and gain greater control over their financial systems.⁴ This state-led push is seen as a direct response to the U.S.’s “weaponization of the dollar” and a way to increase a nation’s independence from global financial systems and foreign currency dominance.⁴

The most prominent example of this trend is the mBridge project, a multi-CBDC platform developed by the Bank for International Settlements (BIS) and central banks from China, Thailand, the UAE, and Hong Kong, with Saudi Arabia joining in June 2024.²⁰ The platform, built on a blockchain called the mBridge Ledger, is designed to enable real-time, peer-to-peer, cross-border payments and foreign exchange transactions using multiple CBDCs, offering a secure and efficient digital channel for transactions that mitigates exposure to geopolitical risks.²⁰ The project is viewed by many as a potential shift towards a more multipolar global financial system, where digital currencies backed by local economies can play a much larger role in international trade and evade U.S. financial sanctions.²⁰ The discussion at the 16th BRICS summit about creating a “BRICS Bridge” based on mBridge technology, as well as the reported consideration by the BIS to shut down the mBridge pilot, underscores its highly politicized nature.²⁰

The mBridge project is not an isolated effort. It is part of a broader, fragmented landscape of CBDC experimentation.

Table 2: Key Multi-CBDC and Pilot Projects

C. A Tale of Two Strategies: U.S. vs. EU

The geopolitical implications of these new technologies are further underscored by the divergent strategies of the world’s two largest economic blocs. The United States has adopted a clear policy of prioritizing private-sector innovation, particularly dollar-backed stablecoins, while explicitly rejecting a government-issued CBDC for the public.²² This approach is codified in legislation like the “Anti-CBDC Surveillance State Act,” which bars the Federal Reserve from issuing a digital dollar, and the “GENIUS Act,” which creates a regulatory framework for private stablecoin issuers.²⁶ The rationale for this strategy is twofold: to avoid the privacy and government surveillance risks associated with a public CBDC and to safeguard the U.S. dollar’s global status by encouraging the adoption of stablecoins, which are seen as an extension of its reserve currency status.²²

The European Union, in contrast, is moving forward with plans for a digital euro, arguing that a public CBDC is essential for maintaining financial stability and achieving “strategic and economic autonomy from the US dollar”.²² European regulators are also using their new crypto framework, Markets in Crypto Assets (MiCA), as a strategic tool to create barriers for non-EU issuers of U.S. dollar-denominated stablecoins.²²

This ideological and legal split reveals a profound divergence in how major powers are approaching the future of money. While the U.S. is betting that its private sector can maintain dollar dominance, the EU is pursuing a sovereign monetary tool to compete. This fragmentation is not merely a regulatory issue; it is a geopolitical one. As nations and economic blocs pursue their own digital currency agendas, the risk of creating a global financial system with competing payment systems and regulatory standards along geopolitical fault lines becomes a real possibility. This uncoordinated pursuit of national strategic objectives, such as digital sovereignty and technological supremacy, will inevitably lead to a more fragmented global financial system.²²

The Dark Side: Risks and Regulatory Fragmentation

The technological revolution in finance is not without significant risks, particularly related to financial integrity, stability, and the ability of states to enforce policy. The very features that make new digital payment systems efficient—their decentralized, borderless, and often pseudonymous nature—also make them attractive to illicit actors and sanctioned entities.

Illicit Finance and Sanctions Evasion

Digital currencies, including cryptocurrencies and stablecoins, have become a powerful tool for circumventing traditional financial controls and sanctions.²⁸ The pseudonymous nature of public blockchains, where users’ identities are hidden behind addresses, can be exploited to facilitate money laundering, terrorist financing, and sanctions evasion.² Research shows that, as a conservative lower bound, over 7% of trades on the peer-to-peer exchange LocalBitcoins from 2017 to 2021 were “crypto vehicle transactions” used to move capital across borders, with roughly 20% of these representing international capital flows or remittances.²⁹ Specific examples of this are highlighted in countries with significant capital controls, such as Venezuela and Nigeria, where cryptocurrencies are used to bypass the financial system.²⁹ Furthermore, countries like Iran and Russia have legalized cryptocurrency payments for imports and utilized bitcoin mining to circumvent U.S. sanctions and make up for lost revenues.²⁸

The U.S. government has taken a firm stance against this abuse, stating that it “will not tolerate” the use of digital assets to support cybercrime and sanctions evasion.³¹ The U.S. Treasury’s Office of Foreign Assets Control (OFAC) has issued guidance confirming that sanctions compliance obligations apply equally to virtual and fiat currencies.³² The government has also demonstrated its commitment through proactive enforcement actions. In March 2025, the U.S. Treasury redesignated the cryptocurrency exchange Garantex for facilitating illicit activities, seizing its web domain and freezing over $26 million in cryptocurrency.³¹ This action, which also targeted a successor exchange, Grinex, and several executives, underscores a proactive approach to disrupting illicit networks.³¹

However, the effectiveness of these measures is limited by the very nature of the technology. While centralized exchanges (known as Virtual Asset Service Providers or VASPs) are within the reach of authorities, non-custodial wallets and peer-to-peer transfers are “beyond the reach of the authorities” because they register only some details of the transaction on the blockchain.²⁸ The rise of a parallel, decentralized financial system poses a direct challenge to the efficacy of traditional foreign policy tools like sanctions, necessitating a shift toward more complex and technologically sophisticated monitoring and enforcement strategies.Financial Stability and Systemic Risk

In addition to illicit finance concerns, the rise of digital finance poses new threats to financial stability. The borderless nature of stablecoins creates a risk of “cryptoisation,” where a significant portion of a country’s population holds wealth in a foreign currency stablecoin, potentially undermining the stability of the local currency and its financial system.²² The rapid adoption and high velocity of stablecoin markets could amplify ongoing shifts in reserve currency markets and impact financial stability in unforeseen ways, affecting treasury liquidity, banks’ balance sheets, and even how fractional reserve lending is currently distributed.¹¹

The integration of AI also adds to systemic risk. While AI can improve risk management, its widespread adoption could lead to new forms of market inefficiencies, information asymmetries, and vulnerabilities to cyber-attacks.¹⁰ The increasing migration of investment to non-bank financial intermediaries that are subject to fewer regulatory constraints than traditional banks could lead to a concentration of risk in a less-transparent part of the market.¹⁰ This asymmetry in risk and regulation creates systemic vulnerabilities that could pose a threat to the broader financial system.

The Challenge of Regulatory Fragmentation

The rapid pace of technological innovation has outstripped the ability of governments and regulators to develop a cohesive legal framework. This has resulted in a fragmented and often conflicting regulatory environment.³⁴ In the U.S., for instance, businesses must navigate a complex web of overlapping and sometimes contradictory federal and state laws, a problem exacerbated by the lack of clear, crypto-specific legislation.³⁴ This makes nationwide operations difficult and creates legal uncertainty for businesses.³⁴

This fragmentation is a global issue, with different countries adopting different rules, and some even banning digital assets entirely.³ The lack of a clear, standardized global framework makes compliance difficult for legitimate actors and creates opportunities for illicit actors to exploit jurisdictional loopholes.³⁵ This regulatory fragmentation is not an accident; it is increasingly being used as a strategic tool by nation-states. The European Union’s MiCA framework, for example, is seen as a way to create barriers for U.S. dollar-denominated stablecoins in favor of a digital euro, using regulation as a lever to achieve monetary autonomy.²² This uncoordinated pursuit of national strategic objectives will inevitably lead to a further fragmentation of the global financial system, with competing payment systems and regulatory standards existing along geopolitical fault lines.²²

Conclusion: The Dawn of a Multipolar Financial Order

The evidence presented in this report confirms that technology is not merely an evolutionary force in global finance but a revolutionary one. It is simultaneously an accelerant of efficiency and a catalyst for geopolitical reordering. We are witnessing a bifurcation of the global financial system into two parallel and often competing realms: one driven by the economic imperative of faster, cheaper, and more transparent capital flows, and another driven by the strategic imperative of national sovereignty, sanctions evasion, and de-dollarization.

The era of a single, centralized, and globally dominant financial infrastructure is drawing to a close. The U.S. dollar’s preeminent status, while still deeply entrenched, is being challenged from multiple directions. China and Russia are building alternative payment networks, while a growing number of countries are pursuing sovereign digital currencies as a means of monetary autonomy. Simultaneously, the private sector is creating a new, borderless financial system that operates outside the direct control of states and traditional financial gatekeepers.

The future of global finance is not a zero-sum game where one system will simply replace another. Instead, it is likely to be a more complex, multipolar financial order characterized by fragmentation, technological diversity, and persistent geopolitical friction. The central challenge for policymakers, executives, and regulators will be to navigate this increasingly complex landscape, balancing the immense opportunities for efficiency and inclusion with the significant risks of illicit finance, systemic instability, and geopolitical division.