The hook. A morning digest on the Iran war flashed a figure an engineer can't walk past: "Iranian settlements in yuan through CIPS for March 2026 totaled $214 billion (+50% from February)." I almost skipped it: well, just another macro statistic in the "emerging markets switching to yuan" genre, tell that to someone who hasn't seen how this works from the inside. But Carnegie Endowment in July 2026 put that figure next to another one that Western outlets carefully avoid putting in headlines: CIPS average daily transaction volume in March surged to 920.5 billion yuan (~$134 billion) — nearly 50% in one month, synchronized with the start of the Hormuz crisis on February 28. And it's not because of Iran. It's because of China, which spent 13 years preparing a replacement for the SWIFT channel, and now — for the first time in history — has both the reason, the lever, and the buyer. The topic is the direct financial twin of the war with Iran, and it hasn't been covered in any of the previous longform pieces about CRINK, Hormuz, or Bessent's sanctions.
Cross-Border Interbank Payment System (CIPS) — China's clearing and settlement system for cross-border yuan transactions, launched in 2015 as an infrastructure project of the People's Bank of China. But the story must start not in 2015, but in 2012 — that's when the PBOC launched construction of CIPS Phase I, and that's when the U.S. Treasury imposed the first serious sanctions on Bank of Kunlun — a relatively small Chinese bank accused of servicing Iranian operations. Coincidence? No. In that gap lie 13 years of meticulous preparation of alternative financial infrastructure under cover of the "yuan internationalization program."
Year-by-year figures, disclosed in Wikipedia and official CIPS reports, show the scale of growth that usually slips past headlines:
June 2025: 176 direct participants + 1514 indirect, covering 4900 banking institutions in 189 countries. According to CNBC as of August 2026 — already 210 direct participants. This is no longer an alternative network, this is a parallel global financial nervous system, which Western financial media write about with an exotic tone, as if discussing something marginal.
Atlantic Council (March 30, updated April 1) gave a detailed breakdown: before the Hormuz crisis, CIPS held in the $85–105 billion/day range (600–750 billion yuan) — stable, no anomalies. On April 1, CIPS officially reported: average daily volume in March — $134 billion (920.45 billion yuan). That's +50% in one month — the biggest monthly jump in the system's history.
Carnegie adds an important caveat: comparable spikes were shown by Hong Kong dollar clearings (USD CHATS) and euro clearing — +31% and +26% respectively. This means part of March's CIPS spike is not a China-specific signal, but general financial chaos due to war and volatility. But another part is structural. And it's precisely this structural part that's interesting.
By April, volume dropped to 827.9 billion yuan (–13%), in May it fell slightly more to 673.9 billion. So part of the March spike is a one-time crisis reaction, part is the new normal. And this new normal is already 15–20% higher than pre-war.
Through Atlantic Council I stumbled on infrastructure that wasn't mentioned in any of our longforms — Project mBridge. This is a platform for direct settlements between central bank digital currencies (CBDCs), created in the Bank for International Settlements Innovation Hub. Participants: PBOC, Hong Kong Monetary Authority, Bank of Thailand, Central Bank of the UAE, Central Bank of Saudi Arabia.
As of August 2026: 4000+ transactions worth $55.49 billion, of which 95.3% by volume — in digital yuan (e-CNY). In November 2025, the UAE conducted its first government payment in wholesale digital dirham through mBridge — and Atlantic Council directly calls this a readiness test for settlements in energy and commodity trade, where China dominates. Iran has no access to mBridge, but the UAE does, and Iranian flows pass through Emirati banks and offshore shell companies without any problems.
G7 financiers in conversations with Atlantic Council directly admitted: they believe mBridge is being used through intermediaries for Iranian settlements already during the current war. There's no proof — the system is opaque by design, and central bank participants aren't required to disclose transactions. But the very fact that the G7 is discussing this says a lot.
To understand why China needs an alternative, you need to remember the history of disconnections. SWIFT is a Belgian cooperative, formally neutral infrastructure. But in 2012 the EU officially instructed SWIFT to disconnect Iranian banks, in 2014 they added Crimean banks, in 2022 — major Russian banks (Sber, VTB, Alfa, etc.). This is a lever that the U.S. can pull at any moment, without violating any international treaties, because formally the jurisdiction is Belgian.
Therefore:
These three systems — SPFS, CIPS, INX — are three parallel poles created as insurance against SWIFT disconnection. And they began working together for the first time in history under the pressure of real war.
Carnegie did a wonderful decomposition usually hidden in financial reports:
Iran, Russia, Venezuela — three major oil exporters for whom dollar settlements are formally prohibited or severely restricted. Venezuela after Maduro's overthrow in 2025 returned to dollar channels. Iran and Russia remained.
Russia — data for March 2026: the Russian banking system, cut off from dollar and euro credit, doesn't have sufficient yuan supply to satisfy Russian business demand for currency for cross-border trade. This is a structural constraint Russia can't yet solve.
Middle East: China's central bank reported that in 2024 cross-border yuan settlements with the region passed almost entirely through Qatar and the UAE — the only two countries in the region with Chinese clearing banks. Of these yuan transactions, only 18% were actually trade-related (~$27 billion of total volume), the rest — investment flows. This is important to understand: yuanization of the Middle East is largely a financial narrative, not a commodity one.
The yuan's share in trade between the Six GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) and China in 2024 — less than 10% of dollar volume. This means dedollarization of oil trade hasn't even come close — it's only beginning, and only in specific nodes (Iran, Russia, partially Malaysia and Brazil).
Saudi Arabia — China's largest oil supplier after Russia. The dollar still dominates — the Saudi riyal is pegged to the dollar, which the kingdom's central bank reaffirmed in February 2026. In 2022 at the Xi Jinping/MBS summit yuan settlements were discussed, in 2023–2024 there were signals of openness, but structurally the switch didn't happen — the Saudi central bank holds dollar assets and issues dollar debt, and in 2025 Saudi Arabia, according to some reports, avoided joining BRICS precisely to avoid being associated with dedollarization.
Malaysia and Brazil — two countries without dollar pegs that actually switched to local currency settlements with China: by the end of 2025 local currency settlements in Malaysian trade with China — over 25%. This is the brightest example.
Atlantic Council gave a detailed map of shadow channels through which Iran actually works around sanctions:
Now the most interesting part — the political signal of August 24, 2026, which makes all this infrastructure sharp. Bessent announced "Operation Economic Outcast" — the largest sanctions wave since the war began: 60 individuals, companies and ships in the UAE, Hong Kong, China, Singapore and Switzerland. Called it "economic D-Day." But when asked if Chinese banks would be punished — the biggest intermediaries of Iranian settlements — he said: "If they participate in the ecosystem turning Iranian oil into money, in reprisals — they will be punished." Not "punished," but "will be punished" — future tense.
And here's where it gets tasty: so far — zero Chinese banks under sanctions. Al-Monitor writes directly: "The Treasury Department stopped short of actually imposing penalties." Atlantic Council through former State Department sanctions coordinator Daniel Fried: "the announcement didn't live up to the hype." Why?
Because September 28–29 Trump and Xi Jinping have a summit scheduled in Washington, and sanctions against a major Chinese bank (ICBC, Bank of China, China Construction Bank — any of the "big four") will destroy the entire November 2025 deal package on rare earths and tariffs. This is CIPS's main vulnerability: for now the system is needed by China as insurance, but as long as Washington doesn't touch Chinese banks directly — China can afford to have CIPS and not force the switch. The moment Washington decides on sanctions against a major state bank, Bessent with one signature will switch CIPS from insurance to main channel.
Dan Wang of Eurasia Group (CNBC, August 2026): "Disconnecting a major Chinese bank from SWIFT would significantly increase pressure on yuan devaluation — this is 'unacceptable' to Beijing." So China has a real reason to keep both feet in the dollar — even after 13 years of building an alternative.
The most devastating chart — from Carnegie: average daily transaction volume in dollars on CHIPS (New York interbank system for major banks) in 2025 — $2.014 trillion. CIPS for the same year — RMB 679.821 billion (~$95 billion). That's 4.7% of dollar volume. Not 50%, not 30% — less than five percent. According to SWIFT for July 2026: dollar — over 50% of all global payments, yuan — fifth with 3.1% (down from 4%+ in early 2025). In trade finance: dollar — about 80%, yuan — second with 8.4%.
The granddaddy of financial narratives "yuan will replace dollar" is dead — at least in the foreseeable future. What China is building is not a SWIFT replacement, but SWIFT insurance. And that difference is qualitative.
In Carnegie and Atlantic Council I found a formulation that explains everything in one sentence. Peter Alexander (Z-Ben, Shanghai director, quoted in CNBC, 25.08.2026): "The emerging financial system isn't necessarily one in which countries abandon the USD. It is a geopolitical hedging instrument".
This is the answer to the question "what is CIPS." It's a hedge, not a replacement. Insurance against disconnection, not an alternative monetary system. And this explains apparent contradictions: China simultaneously holds $3 trillion in dollar reserves (though officially this is "diversification"), builds CIPS, and through its central bank talks about a "golden window" for yuan internationalization — this is all coordinated, because it's a hedging strategy, not a substitution strategy.
And here's another detail I noticed. CIPS was launched October 8, 2015, and on that day it had 19 direct participants and 176 indirect. 11 years later — 210 direct, 1514 indirect, $24 trillion/year. This is an exponential visible only when looking at the entire history, not individual months. The 50% growth in March 2026 is not an anomaly, it's part of a trend running since 2015, just accelerated by war.
The Iran war did exactly what it was supposed to — gave China a market reason to flip the switch and show the infrastructure works under load. Without war, March's CIPS jump would have been 10–15%, and no one would have noticed. With war — 50%, and Atlantic Council writes dispatches about it, Carnegie does analysis, CNBC puts it in headlines.
Three things that hooked me after the report was assembled:
First. mBridge is a deeper level of integration than CIPS. CIPS is settlements through yuan correspondent accounts between banks. mBridge is direct settlement between central bank digital currencies, without intermediary banks. If CIPS is "Chinese SWIFT," then mBridge is CBDC infrastructure that bypasses the banking system altogether. And 95.3% of mBridge volume in e-CNY is not yuan circulating through Chinese banks, but digital yuan existing in a distributed central bank ledger. This is architecturally a different level.
Second. Hawala, crypto, Shetab-Mir — these are not CIPS alternatives, they're alternatives to each other. Iran has 4-5 payment layers operating simultaneously, chosen depending on context: for major state deals — CIPS through UAE; for shadow imports — hawala; for settlements with Russia — Mir; for bypassing crypto exchange sanctions — stablecoins. This is redundancy by design: Iranian financial infrastructure survives precisely because there's no single point of failure.
Third. Argentina and Australia in August 2026 extended bilateral currency swaps with China for tens of billions of dollars. This is not dedollarization — this is an additional yuan liquidity circuit allowing these countries' central banks to obtain yuan liquidity in a crisis without dipping into dollar reserves. And this circuit works as a parallel financial fire brigade — without pretensions to replacement, but with real value in crisis moments.
China isn't building anti-SWIFT. China is building anti-disconnection.
This is the main conclusion I drew from all 7 sources. CIPS is not "Yuan version of global payment infrastructure," it's an insurance policy against SWIFT disconnection, written by China for itself over 13 years and $24 trillion/year throughput capacity. And it works: after March 2026, Beijing has a real alternative in case Bessent or someone after him decides it's time to disconnect ICBC from the dollar system.
The Iran war is CIPS's first combat deployment. Not in the sense that Iranian settlements went through CIPS (this is impossible to verify, Atlantic Council directly says "low visibility"), but in the sense that CIPS withstood the load of a real geopolitical crisis and didn't break. This is a critically important test for any financial infrastructure — and CIPS passed it. 920 billion yuan/day in March is not an anomaly, it's a stress test that PBOC engineers waited 13 years for.
"Hedge, not replacement" isn't a weakness of China's strategy, it's its strength. Beijing isn't repeating the USSR's mistake of trying to impose an alternative (gold standard, transferable ruble) and losing. China maintains its dollar position ($3 trillion reserves) while parallel-building yuan infrastructure. This is a strategy of optionality preservation — keeping choices open. And it works better than "either dollar or yuan."
CIPS's main vulnerability is not in volumes, but in derivatives. Carnegie states directly: "extremely limited depth of offshore yuan derivatives" and difficulties hedging currency risk. As long as traders can't hedge yuan flows through a liquid market of forwards and options, yuan remains a trade currency, not a reserve currency. This is a structural constraint not solved in 13 years — it requires 30+ years of organic financial market development. China understands this, which is why it's not betting on a sprint, but building a "roadmap."
Bessent isn't punishing Chinese banks now not because he can't, but because the September summit matters more. When the summit passes — and this will happen in the next 4–6 weeks — we'll get the first real test: will Washington impose sanctions on a major Chinese bank, and how quickly will CIPS begin compensating for lost dollar liquidity. If the answer is "no, won't impose," then CIPS remains insurance. If "yes, will impose" — this is a historic event, a point of no return for global financial architecture. And I'll be watching September 2026 like an Nvidia quarterly report.