The answer is nuanced: there is real fragmentation, but the blocs are not entirely sealed off from each other. They remain interconnected, though the connections are becoming more strained and contested.

Evidence of Fragmentation

Parallel payment infrastructure is being built:

• China’s CIPS (Cross-Border Interbank Payment System) had 1,683 members by May 2025 and processed $24.5 trillion in 2024. This is a direct alternative to SWIFT, though still much smaller — SWIFT handles over 40 million messages daily versus CIPS’s 8.2 million transactions in all of 2024.
• BRICS Pay and the BRICS Cross-Border Payment Initiative (BCBPI) aim to create a multi-currency clearing infrastructure independent of SWIFT. These are designed to settle trade in local currencies (rupees, yuan, rubles, reais) rather than dollars.
• The proposed BRICS “Unit” — a shared reserve unit backed 40% by gold and 60% by member currencies — represents an attempt to create a non-dollar reserve asset, though it hasn’t been formally adopted.
• By 2025, an estimated ~90% of intra-BRICS transactions were projected to be conducted in national currencies, moving away from the U.S. dollar.

The dollar’s dominance is slowly eroding:

The dollar’s share of global foreign exchange reserves declined from 71% in 1999 to 56.3% in Q2 2025 — a 15 percentage point drop over two decades. This is gradual, not catastrophic, but the trajectory matters.

Sanctions as accelerants:

Russia’s expulsion from SWIFT and the freezing of ~$300 billion in Russian central bank assets after the Ukraine invasion sent a powerful signal to other countries. It demonstrated that dollar-based systems can be weaponized, which has motivated even countries friendly to the U.S. (like Saudi Arabia) to hedge their bets. The NDB (New Development Bank) is shifting toward local-currency lending by 2026.

But the Blocs Still Communicate Extensively

Despite this fragmentation, the global financial system remains deeply interconnected:

• SWIFT still dominates global cross-border payments by an enormous margin. Even CIPS transactions often involve correspondent banks that touch the dollar system.
• The U.S. dollar remains the world’s primary reserve currency, trade invoicing currency, and vehicle currency. No BRICS currency comes close to offering the liquidity, convertibility, and rule-of-law backing that the dollar provides.
• BRICS members themselves disagree on how far de-dollarization should go. Brazil dropped the idea of a common BRICS currency from its 2025 presidency agenda after Trump threatened retaliation. India has close ties with the U.S. and resists anything that looks like submission to China’s financial system. Russia and China are the main drivers; others are more cautious.
• Capital flows, investment, and trade between the “blocs” remain massive. China holds enormous dollar reserves. European banks lend into BRICS economies. Multinational corporations operate across both spheres.
• A formal common BRICS currency has never been implemented and faces enormous practical obstacles — divergent monetary policies, capital controls, lack of trust between members, and the absence of a unified fiscal authority.

The Real Picture: A Fraying but Not Severed System

What we’re seeing is less a clean division into non-communicating blocs and more a gradual, uneven balkanization — parallel infrastructure being built alongside, not replacing, the dominant system. The incentives driving this are understandable (sanctions risk, dollar dependency, desire for financial sovereignty), but the execution is slow, fragmented, and internally contested.

The most significant analogy might be to the internet: technically one global network, but with increasingly distinct regulatory zones (China’s Great Firewall, the EU’s GDPR regime, Russia’s sovereign internet), each operating with different rules, surveillance levels, and access controls — yet still connected at the technical level. The financial system seems to be moving toward something similar.

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These two phenomena are actually related: the more the financial system fragments along geopolitical lines, the harder it becomes to enforce universal reporting standards like CRS and FATCA across all jurisdictions. If a country outside the CRS network adopts stablecoins for cross-border settlement, the regulatory blind spots multiply — not just for tax evasion, but for sanctions evasion, money laundering, and capital flight more broadly.