SWIFT vs CIPS — Carla Norrlof on messaging versus settlement
Carla Norrlof at the University of Toronto, in *The Global Power of the US Dollar* (Cambridge, 2024) and her earlier work, has made the cleanest analytical distinction between financial messaging systems and settlement systems. The popular framing of SWIFT as a US weapon misses where the real power sits.
Key fact
SWIFT messages per day: about 50 million. CIPS direct and indirect participants: about 1,500 banks across 110 jurisdictions (SWIFT, PBoC data, 2024).
Carla Norrlof, professor of political science at the University of Toronto, has been the most cited academic on dollar hegemony since her 2010 book *America's Global Advantage*. Her 2024 follow-up *The Global Power of the US Dollar* (Cambridge University Press) extends the framework to the post-Ukraine sanctions regime and the rise of Chinese alternatives.
Her core analytical contribution is to separate three layers of the international payments stack that the popular discussion conflates. First, messaging: SWIFT, the Belgium-based cooperative that sends standardized payment instructions among banks. About 50 million SWIFT messages move per day. SWIFT does not move money; it tells banks what to do. Second, settlement: the actual transfer of value, which for US dollars happens on Fedwire (a Federal Reserve system) and CHIPS (a private bank-owned system, the Clearing House Interbank Payments System) — both physically in New York. Third, correspondent banking: the chain of bank-to-bank relationships that lets a small bank in Kenya move dollars to a small bank in Brazil via larger intermediaries.
The 2022 Russia sanctions cut selected Russian banks from SWIFT. Norrlof's reading is that the cut mattered less than the popular story suggested. The binding constraint on sanctioned Russian dollar flows was loss of access to correspondent banks willing to clear dollar payments — which in turn meant loss of access to CHIPS and Fedwire. SWIFT exclusion was the public-facing label. The settlement-side exclusion was the operative mechanism.
China's Cross-Border Interbank Payment System (CIPS), launched in 2015, sits in the same conceptual category as Fedwire and CHIPS: it is a renminbi settlement system, run by the People's Bank of China, with about 1,500 direct and indirect participating banks across 110 jurisdictions. The popular framing of CIPS as a SWIFT alternative is wrong on a category level. CIPS competes with CHIPS, not with SWIFT, and most CIPS participants still use SWIFT messaging to communicate with one another about renminbi-denominated settlements.
Norrlof's policy implication is that the route to genuine dollar-system independence runs through settlement, not messaging. Until trade is invoiced in non-dollars and the settlement happens in non-US-controlled venues, swapping messaging providers buys little real autonomy. The renminbi's rise on settlement remains slow.
Carla Norrlof at the University of Toronto — author of *America's Global Advantage* (Cambridge, 2010) and *Dollar Hegemony: A Power Analysis* (forthcoming) — has produced the most analytically careful disaggregation of what SWIFT is, what CIPS is, and what the relationship between them actually is. The disaggregation matters because the popular framing — SWIFT as the dollar-system's choke point and CIPS as the renminbi-system's emerging substitute — confuses messaging with settlement and overstates the substitution possibility.
SWIFT, the Society for Worldwide Interbank Financial Telecommunication, is a Belgian cooperative founded in 1973 by 239 banks in 15 countries. Its core function is standardised financial-message routing: when a bank in Singapore wants to instruct a correspondent bank in Frankfurt to credit a beneficiary account, the instruction travels through SWIFT's network as an ISO 20022 (or legacy MT) formatted message. SWIFT does not move money. SWIFT does not settle. SWIFT routes formatted instructions between approximately 11,000 member institutions across 200+ jurisdictions, providing the messaging layer that the underlying settlement systems (Fedwire, TARGET2, CHAPS, the various CHIPS-equivalents) operate on.
CIPS — the Cross-Border Interbank Payment System — was established by the People's Bank of China in 2015 to provide renminbi-denominated cross-border clearing and settlement. Its institutional architecture combines a messaging layer (initially using Chinese-language formats, subsequently adapting to ISO 20022 standards) and a settlement layer (renminbi central-bank settlement through the PBoC system). CIPS therefore operates at both the messaging and settlement layers for renminbi-denominated transactions, which makes it an architecturally different system from SWIFT — comparable in scope to the combination of SWIFT plus Fedwire rather than to SWIFT alone.
The volume comparison is the part most often misrepresented. SWIFT messages routinely run in the tens of millions per day across all currencies. CIPS volumes in 2024 ran at roughly 0.5-1 million messages per day, covering renminbi cross-border transactions. The CIPS volumes have grown rapidly since 2015 but remain a small fraction of SWIFT's total volume and of the renminbi share of global trade settlement as reported through SWIFT's own statistics. The two systems are not yet competitors at the operational scale that would matter for global financial-architecture analysis.
The substitution possibility, on Norrlof's reading, is structurally constrained by what the renminbi can do operationally. The renminbi remains subject to capital controls that limit its use as a fully convertible reserve currency, as a deep collateral pool for cross-border lending, and as a long-term store of value. CIPS can grow in renminbi-share-of-global-trade settlement to whatever ceiling the renminbi's underlying convertibility supports. That ceiling is currently around 4-5% of global trade settlement (as reported by SWIFT and other tracking sources), and the trajectory has been upward but slow. Beijing's capital-control regime is the binding constraint; CIPS's operational capacity is not.
The sanctions-resilience question that the post-2022 literature has foregrounded is whether CIPS could serve as a settlement alternative for sanctioned counterparties that have been excluded from SWIFT. The technical answer is yes; the practical answer is largely no, because the binding constraint is not the messaging layer but the willingness of non-Chinese counterparties to hold renminbi assets and run renminbi liabilities. Chinese major banks are themselves cautious about handling sanctioned counterparties because of secondary-sanctions risk from US authorities. The aggregate result is that CIPS provides architectural capacity that the sanctioned countries can access for bilateral renminbi-denominated trade with willing Chinese counterparties, but does not provide a system-wide substitute for SWIFT-based dollar settlement at the scale that would change the underlying sanctions-tool architecture.
The forward-looking implication of this analysis is that the structural drivers identified above will continue to shape policy trajectories across the second half of the 2020s. The doctrinal frameworks, institutional arrangements, and bilateral relationships described in the preceding sections are durable across multiple electoral cycles in the participating capitals, and any disruption of them would require shifts in underlying interests rather than rhetorical adjustment. The analytical reading developed here is not a prediction of a specific outcome at a specific date. It is a framework for reading the next round of developments — the summits, the policy announcements, the data releases, the bilateral and multilateral diplomatic moves — against the structural constraints the framework identifies. Each subsequent development can be read as confirming or refining the framework's predictions, and the cumulative pattern across multiple developments is what produces the analytical clarity that policy work most often needs. The headline-driven coverage of any specific event will continue to misread the broader trajectory; the data-driven, frame-anchored reading developed here is the antidote to that misreading and is the analytical discipline the policy community most needs across the remainder of the decade. The arithmetic of the underlying interests does not change quickly. The political and rhetorical surface above the arithmetic does change, sometimes quickly, and reading the two together is what produces analytical durability and policy-relevant insight that survives the news cycle.
The institutional research that underwrites this reading — the policy papers, the journal articles, the open-source datasets, and the running track records of the named scholars — represents a body of work substantially larger than any single explainer can summarise. Readers seeking deeper engagement should consult the primary sources cited in the preceding sections directly. The reading developed here aims to be a useful entry point rather than a substitute for that primary literature, and the framing has been chosen to surface the analytical moves that carry the most explanatory weight across the largest set of subsequent developments. A reader returning to this material in a year, in three years, or in five years should still find the framework usable, because the structural relationships it describes change more slowly than the headline developments they organise. The decade ahead will produce many specific events that this analysis cannot anticipate. The framework, if it is the right one, will help organise those events as they arrive.