UniCredit paid €13.20 per share for roughly 53.1 million shares, generating €702 million for the German state, and the agency said the Italian bank’s offer had significantly outbid everyone else. The price sat above the €12.60 close of the previous session, and Commerzbank shares jumped, peaking at €15.22 before settling at €14.69.

What the seller did not know was that UniCredit had already assembled a comparable position in the market. Chief executive Andrea Orcel later said the German government was well aware the bank had built a 4.5% holding before buying the state block, a claim Berlin disputed. 

The two parcels together took UniCredit above 9%, and when it announced its intention to apply to the European Central Bank to pass the 10% threshold, the news landed like a bombshell.

The derivative ladder
From there, the ascent was engineered rather than negotiated. Within a fortnight, UniCredit raised its position from around 9% to 21%, subject to regulatory approval. 

By December 2024, it had reached roughly 28%, composed of a 9.5% direct stake and about 18.5% through derivative instruments, while applying to the ECB for permission to hold up to 29.9%. 

That authorisation arrived in 2025, with further clearances still needed before the derivative exposure could be converted into physical shares.

The structure mattered. Cash-settled equity swaps gave UniCredit economic exposure without formal ownership, and the counterparty banks that hedged those swaps held the underlying stock in their own names. 

It was a way of standing at the door of control without opening it, and it would become the central grievance in Commerzbank’s defence a year-and-a-half later.

On March 16, 2026, UniCredit announced a voluntary exchange offer at an expected ratio of 0.485 UniCredit shares per Commerzbank share, implying €30.80 per share, or a 4% premium to the close of March 13. 

The bid valued Commerzbank at about €35 billion, and UniCredit was explicit that it did not expect to reach control through the offer, framing the move as a way to overcome the 30% cliff edge that exists under German takeover law, and to open constructive discussions. 

Clearing 30% through a voluntary offer would let it buy further shares in the open market without triggering a fresh bid. Orcel summarised the intent in six words. “It is now time to talk.”

Commerzbank’s response was immediate. Chief executive Bettina Orlopp said the move had not been co-ordinated, and that the expected exchange ratio did not in fact include a premium for shareholders. Law firm analysis at the time noted that the implied price represented the statutory minimum under German rules.

Two years of resistance
Commerzbank’s defence ran on two tracks, one operational and one rhetorical, and the operational one was the more effective.

In February 2025, the bank announced roughly 3,900 job cuts, about 10% of its workforce, alongside raised financial targets, explicitly to fight off pressure for a tie-up. 

In May 2026, it unveiled an enhanced Momentum 2030 strategy, targeting a net return on tangible equity of around 17% by 2028, and around 21% by 2030, with net profit rising to €4.6 billion and then €5.9 billion, and revenues reaching €16.8 billion by 2030 on a 6% compound growth rate. 

A further 3,000 roles, about 8% of the then 38,000 headcount, were earmarked for removal at a restructuring cost of around €450 million, with artificial intelligence cited as an efficiency driver. Orlopp’s framing was blunt. Any alternative had to be measured against that plan.

The formal rejection came in a 137-page assessment that described the offer as carrying considerable risks, and, at the annual general meeting in Wiesbaden, employees held up signs reading ‘UniCredit Go Away’. 

Commerzbank chair Jens Weidmann told shareholders the recommendation was clear, that they should not accept, and drew applause. Chancellor Friedrich Merz had already criticised what he called hostile and aggressive approaches, saying that is how trust is destroyed.

The concerns, weighed on their merits
Four distinct objections ran through the campaign, and they do not all carry equal weight.

Price. This is Commerzbank’s strongest argument, and it is largely arithmetic. On May 15, 2026, the last trading day before the reasoned statement, the implied offer value of €34.56 fell short of Commerzbank’s closing price of €36.48, while independent analysts placed the median target at approximately €41.50, leading both boards to conclude that the consideration was not adequate and rested exclusively on the statutory minimum. 

An offer trading below the market price of the target is not an offer in any commercial sense. It is a standing instruction to do nothing, which is precisely what most holders did.

Tender mechanics. Here the merits are contested. Commerzbank reported that securities lending in its own stock had risen more than tenfold since the offer was announced, that only a portion of tendered shares appeared to be genuinely owned by the tendering parties, and that it was continuously supplying BaFin with its data. 

Its accusation was that tendered shares came largely from banks acting as counterparties to UniCredit’s derivatives rather than from independent investors. The group works council prepared a criminal complaint alleging market manipulation under the German Securities Trading Act. 

UniCredit rejected all of it, saying its disclosures were fully compliant, that claims about share lending were false and without foundation, and that it had referred the matter to BaFin itself. 

Frankfurt prosecutors opened a preliminary examination in June but declined to open a market-manipulation inquiry in July. On the evidence in the public domain, the suspicion is reasonable and the proof is absent.

Jobs and the Mittelstand. Commerzbank’s analysis warned a takeover could lead to as many as 11,000 job cuts, against roughly 7,000 in UniCredit’s own plans, and it dismissed those plans as vague and carrying considerable implementation risk. UniCredit countered with expected annual synergies of €1.5 billion to €2.0 billion. Orlopp told the annual meeting that ‘losses in revenue are significantly underestimated’ in the Italian bank’s modelling, and that restructuring expenses would run far higher than assumed. Both sets of numbers are advocacy. 

The more durable point is structural rather than numerical, and it is that Commerzbank is a principal lender to Germany’s small and mid-sized industrial base, which Orlopp called the backbone of the economy. Whether foreign ownership changes lending behaviour is an empirical question that the campaign asserted rather than demonstrated.

Risk transfer. The rejection flagged UniCredit’s lingering Russia exposure as a net negative, alongside exposure to Italian sovereign holdings. S&P Global Ratings affirmed Commerzbank at A, but cut its outlook from positive to stable in July 2026, warning that full operational absorption could strip the bank of the independent capital buffers that had positioned it for an upgrade. That is a third-party validation of a defence argument, and it is the one investors should take most seriously.

What the German rulebook actually says
Under the Securities Acquisition and Takeover Act, anyone holding at least 30% of voting rights is deemed a controlling shareholder, a threshold set deliberately low because attendance at German annual meetings is routinely well below 100%. 

Section 31 requires adequate consideration, and the Offer Ordinance defines the floor as at least the volume-weighted average domestic exchange price over the three months before the offer decision is published, or the highest price the bidder paid in the previous six months, whichever is higher.

Two features of that architecture produced the outcome Weidmann is objecting to. First, the floor is a market price, and the market price had already been lifted by the bidder’s own accumulation. 

A suitor that buys its way from 9% to 28% over fifteen months pushes the share prices up, then uses the elevated average as its statutory minimum. The rule guarantees shareholders the price the bidder helped create, not a share of what control is worth.

Second, and more decisively, German law contains no restraint on creeping upward once the 30% line has been crossed through a voluntary offer. That is a genuine divergence from comparable regimes. 

Under the UK Takeover Code, a party interested in 30% or more but holding no more than 50% of voting rights cannot acquire any further interest without triggering a mandatory offer to all shareholders. 

Britain treats the 30 to 50 band as a zone requiring continuous protection for minorities. Germany treats it as open ground.

Weidmann’s case, and its weak points
The final tally was 17.60% tendered, which alongside a 26.77% direct stake and instruments conferring rights over a further 3.22% produced 47.59% of capital, and 49.65% of voting rights. 

Commerzbank’s own custodian data indicated that institutional and retail investors accounted for under 2%. 

Weidmann’s version, given to Sueddeutsche Zeitung, was that of the roughly 73% of shares that could have been tendered, fewer than 18% were with institutional and retail investors, making up less than three percentage points, and the remainder coming from banks linked to UniCredit. 

His conclusion was that UniCredit achieved a majority with a financially unattractive offer without paying an appropriate control premium, and that the episode ‘raises questions about takeover law in Germany, which lawmakers may want to examine’.

On the narrow legal design point, he is right, and the UK comparison shows a workable alternative exists. But the argument has soft edges.

The shareholders were not compelled. They were offered a price below the market, they overwhelmingly refused, and the share price rewarded them for refusing. 

In that sense, the law functioned. What failed was not investor protection, but the assumption that a bidder needs consent to accumulate influence. 

A creeper provision would fix that. A premium requirement, by contrast, would be a novel intervention with no obvious method for calculating what control is worth in advance.

There is a further problem with the register itself, which no side has been willing to state plainly. A large slice of Commerzbank is held by index funds and other passive vehicles that neither tender nor campaign. BlackRock alone held around 7.2% when UniCredit first appeared. 

A defence that depends on shareholders declining to act is a defence built on inertia, and inertia is not the same thing as support. It also works only while the offer sits below the market price. Raise the consideration meaningfully and the same passive holders become sellers.

Can Berlin even fix it alone?
A review would also collide with European law. The mandatory bid obligation is harmonised at EU level under the Takeover Directive, which sets the framework member states transpose. 

A British-style restraint on the 30 to 50 band would be a national addition rather than a rewrite of the core threshold. So, the question is not whether Germany may legislate at all, but how far it can go before Brussels reads the result as a barrier to cross-border consolidation. That is not a theoretical worry, and the reason it is not theoretical sits in Milan.

UniCredit is not only a bidder that could not be stopped. It is also a bidder that was stopped, at home, by exactly the kind of instrument Germany does not have for banks.

In July 2025, the group withdrew its offer for Banco BPM because the golden power authorisation condition was not satisfied, ending a bid that had valued the Italian rival at around €10 billion when launched. 

Orcel described the position bluntly on the results call that followed. “We have been completely stuck since early April.” The government of Giorgia Meloni had attached a series of conditions to clearance, including a demand that UniCredit wind down most of its Russian activities.

Brussels then intervened against Rome. The European Commission wrote to the Italian government challenging the decree, said Italy had breached EU rules, and reminded it that the ECB is the only prudential supervisor of systemically important euro zone banks, having already cleared the offer without conditions. The Commission indicated it could order the conditions revoked.

The sequence is instructive for Germany. A member state that reached for a national veto over a domestic bank merger was told by the Commission that it had overstepped. Any German attempt to build a bank-specific shield, whether through takeover law or an investment screening route, would meet the same institutional resistance. 

Weidmann’s framing, which stays carefully on the terrain of shareholder protection rather than national interest, is the only version of this argument with a chance of surviving contact with Brussels.

The bill Berlin is still paying
The state’s own position deserves more scrutiny than it has received. Commerzbank absorbed €18.2 billion in capital from the German government across 2008 and 2009, of which roughly €13.15 billion had been repaid by the time the stake sale began in September 2024. 

In 2019, answering a parliamentary question during the abortive Deutsche Bank merger talks, the Finance Ministry indicated the share price would need to be around €26 for the state to avoid a loss on its remaining holding.

The stock now trades comfortably above that level. For the first time since the rescue, Berlin can sell without booking a loss, which is a far better explanation for the softening in official language than any change of heart about Italian ownership. 

Weidmann has argued that the government should hold on for the time being despite the holding’s origins in a crisis rescue, saying it makes sense for the state to remain a shareholder in order to represent Germany’s interests as a business location. 

Yet, reporting in August indicated senior figures in government are now willing to discuss selling the 12.7% stake to UniCredit if there is agreement on strategy and governance, a transaction that would lift the Italian bank above 60%.

There is an awkward symmetry here. The first parcel was sold by the German state, in a competitive auction it designed, to the highest bidder. The last parcel may be sold by the German state to the same buyer, at a price the state finally finds acceptable, having spent two years objecting to the manner of the pursuit.

Where it stands
Commerzbank opened talks with UniCredit on August 6, saying a joint approach could create value for shareholders, customers and employees, on the back of second-quarter net profit of €898 million, up 94% year-on-year. 

BaFin declared UniCredit’s control application complete in early August and passed it to the ECB, which has 60 working days to rule. Reuters reported that an internal ECB document pointed toward approval, while cautioning that a full merger would involve a challenging and lengthy integration. 

A treasury share cancellation on August 20 lifted UniCredit’s effective position to 49.65% without a single additional purchase.

What that position actually buys is less than the headlines suggest. Just under half the voting rights delivers shareholder resolutions and influence over board composition. 

It does not deliver the balance sheet. A domination and profit transfer agreement, the instrument that would let UniCredit direct Commerzbank and pool its capital, requires 75% of the share capital represented at a general meeting. 

A squeeze-out of remaining minorities requires 95%. The gap between 50% and either of those numbers has to be bought, in the market, from holders who have already demonstrated that they will not sell cheaply. That is the real cost of the strategy Orcel chose, and it is deferred rather than avoided.

The workforce question runs alongside it. German codetermination gives employees half the supervisory board seats at a company of Commerzbank’s size, and the works council has already shown it will litigate. 

A controlling shareholder in Milan does not remove those rights, and any attempt to restructure around them would become a political fight of its own.

Weidmann’s other warning, that UniCredit’s planned €1.3 billion of cost cuts within a single year would threaten the substance of the German bank, is the argument that will matter once the ownership question is settled.

The takeover law review he wants will take years and will arrive far too late for Commerzbank. Its real audience is the next German target, and the next bidder studying the same rulebook for the same gap.

The post Wall Street’s capital truce collapses over one line in Fed rulebook appeared first on International Finance.

So were Blackstone president Jon Gray, Apollo president Jim Zelter and Brookfield chief executive Bruce Flatt. KKR sent Waldemar Szlezak, who runs its digital infrastructure business. Larry Fink of BlackRock joined by video link from the road.

The segment ran for more than half an hour and contained remarkably little detail. What it contained instead was a message, delivered with the theatrical confidence that has become Huang’s trademark.

Nvidia had signed memorandums of understanding (MoU) with all six firms to create what it called independent compute financing platforms, with the aim of mobilising more than $500 billion of third-party capital for the construction of AI data centres and the purchase of Nvidia hardware.

No deals had actually been signed. There is no fixed timetable. The USD 500 billion figure, as Bloomberg later reported, is a round number combining transactions already under discussion with a forecast of demand still to come. Each lender will vet borrowers individually before committing a cent.

And yet the announcement may prove to be one of the most consequential financial events of the AI era. Because what Huang was really doing was not raising money. He was proposing a new asset class.

The problem nobody could keep paying for

To understand why Nvidia needed to stand on a stage with six financiers, look at what has happened to the balance sheets of its biggest customers.

For most of the last decade, Big Tech funded its own expansion. Cloud businesses threw off enormous operating cash flow, and capital spending, however large, stayed comfortably inside it. That relationship has now broken.

Alphabet, Amazon, Meta and Microsoft have collectively guided to something close to USD 700 billion of capital expenditure in 2026, a rise of roughly three quarters on the previous year’s already record figure.

Bank of America projects aggregate hyperscaler capex will top USD 860 billion this year and approach USD 1.2 trillion in 2027. Goldman Sachs now models more than USD 5 trillion of combined capex for the big four between fiscal 2025 and fiscal 2030.

The cash consequences arrived faster than most investors expected. Alphabet posted its first negative free cash flow quarter since its 2004 listing in the second quarter of 2026, burning USD 5.9 billion as capital spending surged past USD 44 billion in three months.

It then raised the top end of its full year capex guidance by as much as USD 15 billion. Amazon’s trailing 12-month free cash flow swung to negative USD 7.6 billion after three consecutive positive years.

Research house Epoch AI, fitting growth curves to quarterly filings, calculated that aggregate hyperscaler cash capex would overtake operating cash flow somewhere around the third quarter of 2026. That crossover point is now behind us.

Microsoft remains the outlier, the only one of the American hyperscalers still generating meaningful free cash flow, and it has managed that partly by leasing rather than buying, adding some USD 26 billion of finance lease assets over four quarters rather than issuing senior bonds.

The rest have gone shopping for outside money, and at extraordinary scale. FactSet calculates that incremental annual debt has risen from 9% of hyperscaler capex in fiscal 2024 to 32% by mid-2026.

Equity has returned to the funding mix too. Alphabet priced an USD 84.75 billion raise in June 2026, the largest equity capital transaction ever completed by a listed company, including a USD 10 billion private placement with Berkshire Hathaway.

Oracle, the most leveraged of the group, raised USD 43 billion of debt and USD 5 billion of equity in fiscal 2026 and plans roughly USD 40 billion more.

Then there is the arithmetic that hangs over the whole sector. Morgan Stanley’s widely circulated estimate puts global data centre capital expenditure through 2028 at around USD 2.9 trillion, against hyperscaler operating cash flow capable of covering perhaps USD 1.4 trillion of it.

The remaining USD 1.5 trillion has to come from somewhere else. In Morgan Stanley’s own bridge, the largest single share, about $800 billion, is allocated to private credit, with roughly USD 200 billion from corporate bonds and USD 150 billion from securitised products.

That USD 1.5 trillion hole is the reason six financiers were sitting in a television studio in August.

Why Nvidia cannot simply write the cheque

Nvidia is not short of money. It reported record revenue of USD 81.6 billion in the first quarter of fiscal 2027, up 85% year on year, with data centre revenue of USD 75.2 billion and gross margins around 75%.

It has authorised a further USD 80 billion of share buybacks and raised its dividend 25-fold. Its market capitalisation sits around USD 5.5 trillion.

But Huang has said publicly that AI infrastructure spending could reach USD 3 trillion to USD 4 trillion a year by the end of the decade. At that scale, no single corporate balance sheet is adequate, including his own.

There is a second problem, and it is arguably more urgent. Nvidia’s growth increasingly depends on customers who are not hyperscalers. Frontier laboratories such as OpenAI and Anthropic, specialist AI clouds, sovereign projects and enterprises want compute at scale, but many of them lack the credit rating or the cash to buy millions of dollars of silicon outright.

Meanwhile the hyperscalers, Nvidia’s traditional customers, are busy designing their own accelerators. Broadening the buyer base is a strategic necessity, and the constraint on that broadening is no longer chip supply or data centre shells. It is financing.

Nvidia’s earlier attempts to solve this itself produced exactly the reaction it feared. The company has invested in customers including CoreWeave, contributed billions to an OpenAI funding round, and joined a consortium backing xAI. Analysts began describing the pattern as circular financing, the vendor funding its own demand, and comparisons to the telecom vendors’ financing collapse of the dot com era followed quickly.

The reaction sharpened when reports emerged that Nvidia was weighing a USD 250 billion guarantee for an OpenAI data centre project in Ohio. Nvidia shares fell 5%, and the price of credit default swaps on Nvidia bonds recorded their largest intraday move since they began trading actively. The company subsequently trimmed that guarantee to under USD 120 billion, covering only the first phase.

Seen against that background, the six-way partnership is a deliberate correction. Nvidia will still provide credit support, but Huang clarified after the announcement that its guarantees would cover as much as 25% of an opportunity, assessed project by project.

The other 75%, and the origination, structuring, distribution and warehousing of the risk, belongs to Wall Street. The chipmaker keeps the demand and sheds most of the balance sheet.

The intellectual move at the centre of the deal

Huang’s contention is that a rack of Nvidia GPUs should be treated the way a lender treats a warehouse, a toll road or a power station.

In his framing, Nvidia compute is an investable infrastructure asset, productive, revenue generating and fungible across the entire market.

Nvidia’s own statement described its compute as broadly adopted, transferable between customers and operators, and continuously improved by CUDA software updates that extend its useful life.

If that classification holds, everything else follows. Loans can be secured against the hardware itself alongside the offtake agreements that guarantee its use. Special purpose vehicles can own chips and lease them to Nvidia’s customers, keeping the debt off the customer’s balance sheet and off Nvidia’s.

Those vehicles can then issue bonds, some expected to run to tens of billions of dollars each. If a borrower fails, the chips can be re-rented to somebody else, which limits the damage from any single default. Insurance capital, pension money and sovereign wealth funds can buy the resulting paper, because it looks and behaves like infrastructure debt.

If the classification does not hold, the whole edifice is a very large pile of fast depreciating electronics dressed up as real estate.

The case against

An H100 that changed hands for roughly $30,000 in 2023 was trading at around $8,000 by the middle of 2026, a fall of about 73% in three years. Hourly rental rates for the same chip peaked near USD 8, collapsed to between USD 1 and USD 2 as supply arrived, recovered, then softened again.

CUDA’s ecosystem of more than six million developers may guarantee that a buyer exists for repossessed hardware. It does not guarantee the price.

Michael Burry, who made his name calling the last credit crisis, has attacked the depreciation schedules underpinning the sector, arguing that a two-to-three-year hardware upgrade cycle cannot support five- and six-year useful life assumptions, and estimating that understated depreciation could distort reported earnings by around USD 176 billion between 2026 and 2028.

Accounting specialists have pushed back on the strongest version of that claim, but the debate has moved from technical footnotes to the front of investor decks.

Then there is China. Bernstein Research expects Nvidia’s share of the Chinese AI chip market to collapse from roughly 40% to around 8% by the end of 2026, with Huawei approaching half the market. Should Chinese production flood the world with cheap compute, the collateral behind these loans could erode faster than the loans amortise.

One analyst estimate suggests investors will price GPUs as high depreciation equipment rather than property, and demand yields of 11% to 17% depending on their position in the capital structure. That is high yield pricing, and it sits well above what a hyperscaler pays in the corporate bond market.

Rating agency methodology for GPU backed securitisations, meanwhile, is still being worked out. Fitch has yet to publish a settled approach.

What Wall Street actually gets

Fees, and a lot of them. Alternative managers earn management fees on committed capital, typically 1.5% to 2%, plus carried interest on profits. Fee related earnings are what analysts prize, because they are recurring and predictable.

Apollo reported record fee related earnings of USD 785 million in the second quarter of 2026, up 25% year on year, on USD 74 billion of originations. Strikingly, that figure excluded the USD 35 billion Broadcom AI infrastructure financing entirely, because Apollo books volume at closing rather than announcement, leaving roughly USD 50 billion of signed deals to feed later quarters.

Management has also noted a shift towards structures that recognise fees across multiple quarters or years rather than upfront, smoothing earnings in a way public shareholders reward. Goldman, the only participant with a full investment banking apparatus, collects the underwriting and distribution economics on top.

A home for permanent capital. The deeper motivation is a liability problem. The five largest listed alternative managers now oversee about USD 1.5 trillion of perpetual capital, roughly 40% of their combined assets, much of its insurance and annuity money gathered through platforms such as Apollo’s Athene, KKR’s Global Atlantic and Blackstone’s insurance mandates.

Annuity liabilities are long dated and require long dated, contracted, investment grade style assets to match them. Those assets are scarce. A twelve-year lease on a GPU cluster with an investment grade offtaker attached is, in principle, exactly the instrument these balance sheets are hungry for.

Apollo’s private credit assets alone stand at roughly USD 405 billion, Blackstone’s credit and insurance arm at about USD 465 billion, BlackRock at around USD 220 billion after its HPS and GIP acquisitions, and KKR at about USD 140 billion. All of that money needs somewhere to go.

Ownership of a new market at its inception. Asset classes are created rarely. Whoever writes the first documentation, sets the advance rates, defines the residual value assumptions and builds the ratings dialogue tends to own the league tables for a decade.

Data centre securitisation issuance ran near USD 27 billion in 2025 and is projected by JPMorgan at USD 30 billion to USD 40 billion annually in 2026 and 2027, a rising share of the combined asset backed and commercial mortgage-backed market.

CoreWeave has already priced an USD 8.5 billion investment grade rated GPU collateralised transaction. Nvidia has now handed six firms a franchise position in the market that follows.

Better risk for the same yield. Nvidia’s willingness to backstop up to a quarter of a transaction materially changes the credit maths. A lender writing a loan against hardware alone is exposed to residual value.

A lender writing the same loan with a first loss cushion from a company with 75% gross margins and a $5.5 trillion market capitalisation is in a different business. Combine that with collateral that mixes the chips themselves with contracted offtake, and with the ability to re-rent hardware to a different tenant on default, and the risk adjusted return starts to look attractive even at spreads well inside 11%.

Distribution, which is where the real prize sits. These firms do not intend to hold the paper. They intend to originate it and sell it. Executives are already sounding out sovereign wealth funds, pension schemes and insurers, and indicated during the announcement that some of the capital could come from retail investors.

That last point matters more than it sounds. American regulators have recently opened the roughly $13 trillion defined contribution market to private credit managers, while Europe’s revised ELTIF regime has broadened what long term investment funds may hold.

Non traded business development companies and evergreen vehicles are growing quickly. A manufacturing line for long dated, contracted, AI linked credit feeding those channels is a business with obvious compounding characteristics.

Apollo is expanding a trading operation to sell down chunks of what it originates and make markets in the paper afterwards, which adds a second fee layer.

Adjacency. The financing will not be a single product. As Mercer’s global head of real assets observed after the announcement, the partnerships are likely to spawn strategies across infrastructure, real estate credit and possibly private equity, giving investors multiple access routes. Data centres need land, power, transmission, cooling and construction finance. A firm that anchors the compute layer is well placed to sell the rest.

Competitive necessity. Nobody wanted to be left out. Huang has said he approached only these six and none refused. Within minutes of the announcement, Morgan Stanley published a framework to facilitate USD 1.5 trillion of funding for American innovation and national security, with AI and advanced computing at the top of the list.

JPMorgan’s asset management arm is reportedly discussing how to participate. Broadcom set the template weeks earlier, tapping Apollo and Blackstone as anchor investors for more than 20 gigawatts of compute for frontier laboratories through 2028, with USD 35 billion already committed and the borrowing structured to sit off Broadcom’s balance sheet.

Where the win-win could break

The mutuality depends on one assumption holding for a decade. Chips must remain productive long enough, and generate enough revenue, to service the debt raised against them.

Apollo’s own published view illustrates the tension. The firm has argued that more than $5 trillion of expected data centre capital expenditure implies USD 1.5 trillion to USD 2 trillion of annual AI revenue by 2030, against USD 40 billion to USD 60 billion today. That is the gap the entire structure is betting will close.

The risk is no longer confined to technology shareholders. It now runs through special purpose vehicles, private credit originators, securitisation trusts and ultimately into pension portfolios and insurance reserves.

Insurance regulators have already tightened capital treatment for collateralised loan obligations and overhauled how collateral loans are charged, moving from a flat charge to a framework tied to what actually backs the loan.

American law firms are circulating client alerts on litigation risk in AI data centre financing. The Federal Reserve Bank of Chicago has noted that direct bank exposure to AI adjacent industries averages under 1% of assets, while cautioning that indirect exposure through lending to private credit funds is harder to see.

One person close to the announcement described Huang’s intention as building a debt shopfront, an advertisement aimed simultaneously at customers and at nervous investors. If the deals do not materialise as promised, or if they sour, the reputational cost lands on all seven names.

The final take

Nvidia has done something clever. It has kept the demand, capped its exposure at roughly a quarter, and persuaded the deepest pools of capital in the world to carry the rest.

Wall Street, for its part, has been handed a manufacturing line for exactly the kind of long dated, contracted, high yielding asset its insurance balance sheets and retail distribution channels have been starved of.

Both sides get what they want. Whether the arrangement is a win for the pensioners and policyholders who end up owning the paper depends entirely on a question none of the seven firms on that stage could answer, which is how long a graphics processor stays valuable.

The post How Nvidia turned its chips into Wall Street’s newest asset class appeared first on International Finance.

On August 10, Westpac Banking Corp gave the market a number that summed up the mood in Australian housing. New mortgage applications were running 20% below the previous quarter, twice the drop the bank had recorded in the weeks straight after the May budget. The lender also told investors that credit growth for housing investors would more or less halve next year, from 9.1% in 2026 to about 4.5% in 2027.

Westpac shares fell as much as 5.9% on the day, the bank’s worst session since April 2025. Commonwealth Bank of Australia, National Australia Bank and ANZ all dropped more than 2% alongside.

None of this was supposed to be the story. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 was framed as a housing affordability measure, a way of tilting the market back towards people trying to buy their first home rather than people buying their fourth.

Six weeks after it cleared parliament, the clearest evidence of its bite is not in the hands of first-home buyers. It is in the loan books of the four institutions that sit at the centre of almost every property transaction in the country.

What the law actually does

The package was announced in the 2026-27 federal budget on May 12, introduced in the House of Representatives on May 28, and passed both chambers on June 25 after a short and bad-tempered committee process.

The Greens sided with the government in the Senate to block a Coalition attempt to delay the vote.

The lower house passed the amended bill 98 votes to 39. It was enacted the following day. Under a month from introduction to law is fast by any standard, and the speed is part of why the reform is still being argued about.

Two changes matter most, and both start on July 1 2027.

The first restricts negative gearing on residential property to new builds. Negative gearing lets an investor deduct the shortfall between rental income and costs, mostly loan interest, against their other income, including wages. From July 2027, investors who bought an established dwelling after 7.30 pm AEST on May 12, 2026 will no longer be able to do that.

Losses on those properties are quarantined instead. They can be carried forward and offset against residential rental income or against future capital gains on rental property, but not against salary in the year they occur.

Grandfathering is generous. Anyone holding a property at budget night, including buyers who had exchanged contracts but not yet settled, keeps the existing treatment until they sell. Eligible new builds keep both negative gearing and the 50% capital gains discount.

Build-to-rent projects, properties in widely held trusts and superannuation funds, and private investment supporting government housing programmes are all carved out.

The second change is broader and reaches far beyond housing. For capital gains events on or after July 1, 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation using the consumer price index, so that only real gains are taxed, together with a new minimum tax rate of 30% on capital gains.

The change applies prospectively, to gains accruing after the start date, with taxpayers establishing a value for their assets as on that day. It also ends the pre-CGT shelter that has protected assets acquired before September 20, 1985 for four decades.

Late amendments softened some edges. The turnover threshold for the small business 50% active asset reduction was lifted from AUSD 2 million to AUSD 10 million, deductible gifts and donations now reduce gains caught by the 30% minimum, and some ministerial instrument-making powers were trimmed.

On June 18, the government also flagged an Innovative Business CGT Concession for founders, employee share scheme participants, and early-stage investors, after complaints that the regime punished people who had built companies from a low-cost base.

Why the backlash has been so fierce

The first is political. Prime Minister Anthony Albanese ruled out touching negative gearing and the capital gains discount repeatedly during the 2025 election campaign. Legislating both inside the following parliamentary term, and doing it in five weeks, handed the opposition a straightforward argument about mandate and trust.

It is the second significant tax reversal in eight months, after the government’s retreat on superannuation late last year. The government’s answer is that the problem could not be deferred any longer. That may be true, and it does not settle the question of whether voters were told.

The second is about rents. Australia’s rental market entered this reform with almost no slack. Vacancy is running near 1.6% nationally and advertised rents are climbing close to 6% a year.

Critics argue that discouraging investors from buying established homes does not remove a single dwelling from the country, but it does change who owns it, and a first-home buyer moving into a house that was previously tenanted takes one rental off the market while removing one household from the queue. The offsetting effect is real but slow, and the timing gap falls on renters.

The third is about who gets caught. The quarantining rule is blunt in a way that works against small investors. An investor with a single leveraged property and no other rental income has nothing to offset the loss against, so the deduction sits unused for years.

An investor with a portfolio can absorb the loss against rent from other holdings almost immediately. Around two-thirds of Australia’s landlords own one property. The reform, aimed at speculation, lands hardest on the smallest participants and on people who were about to become landlords for the first time.

Complexity is the quieter complaint. Advisers point out that almost every resident individual and trust holding a capital asset now needs a defensible valuation as on July 1, 2027, that succession and exit planning has to be reworked, and that the loss of pre-CGT status will surface in family businesses and farms that have nothing to do with housing.

The experts do not agree, and that matters

The construction and property lobby moved early. Modelling by Qaive and Tulipwood Economics, commissioned jointly by the Housing Industry Association, Master Builders Australia, the Property Council of Australia and the Real Estate Institute of Australia, tested several versions of the reform and found housing starts falling in everyone.

The harshest scenario, removing negative gearing except for one property per investor, produced 45,500 fewer dwelling starts over the five years to 2029-30, a AUSD 3.1 billion hit to GDP in net present value terms, and about 4,250 fewer construction jobs a year.

The version closest to what parliament passed, restricting the concession to new construction while grandfathering existing holdings, pushed rents up by almost 1% a year above the baseline.

HIA managing director Jocelyn Martin’s argument is simple enough to fit on a placard, that taxing property more heavily produces fewer homes. Master Builders chief executive Denita Wawn called the findings unequivocal.

The Grattan Institute reaches a very different conclusion from the same starting point, projecting national price falls of one to two percent with limited rental disruption, on the reasoning that the tax concessions mostly inflate the price of existing stock rather than fund new supply.

Reserve Bank and Australian Bureau of Statistics data give that view some support, since the overwhelming majority of investor lending has historically gone to established dwellings rather than new construction. A Senate committee inquiry in March recommended cutting the discount for much the same reason, arguing the settings distorted the market in favour of investors over owner-occupiers.

Both camps are arguing honestly, and the honest read is that the outcome depends almost entirely on design. Whether the new build exemption is workable, and how the term is defined in the regulations still to come, will decide whether investor money rotates into construction or simply leaves housing.

A market already turning

The reform arrived into a downturn it did not cause but has clearly sharpened.

Cotality’s national Home Value Index fell 0.4% in June, the third consecutive monthly decline, and the largest since December 2022.

July was worse at 0.7%, and the weakness stopped being a Sydney and Melbourne problem. Sydney values fell 1.4% over the month and Melbourne 1.2%, with Melbourne having peaked in November and Sydney in January. Brisbane fell 0.6% and Adelaide 0.2%, second consecutive monthly declines for both after revisions.

Perth is the case that best illustrates how quickly the ground has shifted. The city was recording monthly gains above 3% as recently as November, and is still up more than 20% year-on-year.

It posted a nominal 0.1% rise in July, but only after Cotality revised its June figure from a 0.7% gain to a 0.5% fall, leaving the quarter negative, and PropTrack has the city declining outright. Flat is the fair description of a market that was the country’s engine room a few months ago.

The composition of the fall is revealing. Over the three months to July, upper-quartile values fell 3.2% nationally while lower-quartile values edged up 0.3%.

Expensive stock is bearing the correction, partly because higher borrowing costs bite hardest on large loans, partly because first-home buyer schemes support demand below the median, and partly because investors selling ahead of the 2027 start date are concentrated in premium property.

The wider backdrop is unforgiving. The cash rate sits at 4.35% after 75 basis points of increases this year, consumer sentiment is deeply negative, capital city sales volumes are running 16.2% below a year ago, and auction clearance rates have been under 50% since late May, the weakest in six years.

Investor mortgage rates average about 6.4% against a gross yield of 3.5%, which makes leveraged residential investment hard to justify on income alone even before the tax change lands. Most economists now expect the first rate cut around the middle of 2027, not this year.

Forecasters have adjusted accordingly. CBA cut its December 2026 price growth forecast to 3% from 5%, citing the negative gearing changes and expecting the sharpest impact in apartments and cheaper stock where investors cluster.

Westpac IQ now expects prices to finish the calendar year flat nationally. Domain sees Sydney and Melbourne house prices falling over the year to June 2027 while Perth, Adelaide and Brisbane reach fresh records, a divergence that is arguably the real story of this cycle.

Why this lands on the banks

Mortgages account for roughly 60% of the big four’s combined credit books, against 40% to 50% at global peers, and that share has grown as the banks retreated from wealth management, advice and offshore assets.

The four control more than 70% of the national mortgage market, with CBA alone holding about a quarter of home lending. Foreign investors now own somewhere between a quarter and a third of the majors, drawn by the same qualities that made the sector a domestic staple, reliable fully franked dividends underwritten by rising property values and benign credit losses.

The banks touch every stage of a transaction. They set serviceability buffers that determine what a buyer can bid. They commission the valuations that decide whether a deal settles at the agreed price. They price investor loans above owner-occupier loans and earn more on them.

They fund the broker channel that originates most new lending, sell lenders mortgage insurance on high loan-to-value deals, and securitise the resulting book. Crucially, serviceability assessments for investors have long incorporated the tax benefit of negative gearing. Strip that out for established dwellings and the same borrower qualifies for a smaller loan, which reduces both volume and average loan size at once.

That is precisely what the numbers now show. Westpac’s applications are down 20%, with investor applications down about 26% and owner-occupier applications down 18%, according to Morningstar’s read of the update, which suggests rate rises are doing as much damage as the tax change.

NAB reported applications down about 15% over the June quarter with application values off 9%, attributing part of it to uncertainty over the reform. Westpac’s third-quarter cash earnings came in at AUSD 1.8 billion with stable margins and 2% loan growth, respectable numbers that the market ignored in favour of the forward guidance.

Analysts are now questioning the sector’s core promise. Jarden’s Matthew Wilson describes a difficult earnings environment built on weaker volumes, margin pressure and longer-run credit quality concerns, and his team has flagged a separate problem.

Average mortgage risk weights across the majors have climbed to about 23%, from 14% in 2014, meaning the same loan book consumes materially more capital. Payout ratios set when home lending was growing faster than corporate lending start to look stretched.

Jarden holds sell ratings on CBA, NAB and Westpac, and prefers ANZ. Morningstar forecasts fiscal 2027 home loan growth of just 2.5%, well below Westpac’s own 4.7%, and considers Westpac shares roughly 20% overvalued on a forward multiple above 17 times.

The market has been moving that way for months. Between late February and late May, NAB fell 23%, Westpac nearly 14.5%, ANZ 11.2% and CBA 5.6%, making them the worst performers among Asian bank stocks.

Several majors have already begun job cuts, offshoring and automation programmes, moves analysts expect to accelerate if revenue growth stays weak. Argo Investments senior investment officer Andy Forster captured the consensus, that dividends can probably be defended but are unlikely to grow.

What to watch

Nothing in the law takes effect for another eleven months, and that gap is the immediate risk. Investors selling ahead of the start date add listings into a falling market, while buyers wait for regulations that will define what counts as a new build. Both behaviours depress prices in the interim, regardless of where the reform settles in the long run.

For the banks, the pressure is measurable and already booked into forecasts. For renters, the squeeze arrives before any relief.

For first-home buyers, whose interests justified the whole exercise, the benefit depends on whether cheaper established housing arrives faster than the rental market tightens around them. Canberra has made a structural bet on the answer. The transmission is running through the banking system first.

The post Australia rewrote the property rules and its banks are paying first appeared first on International Finance.

It is heavy, it needs to be stored securely, and moving it across borders or between owners is slow and expensive. In a world that increasingly runs on digital speed, gold has remained stubbornly analogue.

Tokenised gold is changing that. It takes the oldest store of value in human history, and gives it a passport into the digital economy. As more of our everyday devices and systems begin talking to each other and to blockchains directly, tokenised gold may end up being just one small piece of a much larger transformation. To understand why this matters, it helps to break the concept down from the ground up.

As David Tait, CEO of the World Gold Council, put it earlier in 2026, “Gold faces a rapid and pervasive digital transformation.” In financial services, the metal must evolve to keep its place in the system.

At its simplest, tokenised gold is a digital token that represents ownership of a specific amount of physical gold. Each token is typically backed by a fixed quantity, often one gram or one troy ounce, of real gold bullion sitting in a vault somewhere in the world. The token itself lives on a blockchain, the same technology that underpins cryptocurrencies like Bitcoin and Ethereum.

Smart Contracts Explained

The link that connects the digital token to the physical metal is something called a smart contract. A smart contract is essentially a self-executing computer programme stored on a blockchain. It automatically carries out an agreement once certain conditions are met, without needing a bank, broker, or middleman to approve each step.

In the case of tokenised gold, smart contracts manage the rules around minting new tokens, transferring ownership, and redeeming tokens for physical gold. When a company issues new tokens, the smart contract typically requires proof that an equivalent amount of gold has been added to the vault.

When someone wants to redeem their tokens for actual gold bars, the smart contract handles the process of burning, or permanently removing, those tokens from circulation while triggering the physical delivery process.

This automation removes a lot of the friction and human error that traditionally came with gold trading. There is no need to physically inspect a vault every time a trade happens. The smart contract and the blockchain record do that verification work continuously.

Trust You Can Verify

Of course, none of this works without trust in the actual gold sitting in storage. This is where audited vaults come in. Companies that issue tokenised gold typically store their physical reserves in secure, professional-grade vaults, often located in established gold trading hubs.

To maintain credibility, these vaults are regularly checked by independent third-party auditors. These auditors verify that the amount of gold physically stored matches the number of tokens issued. If there are one million tokens in circulation, each representing one gram of gold, the audit confirms there really are one million grams, or one thousand kilograms, sitting in the vault.

Many issuers also allow token holders to view detailed information about the specific gold bars backing their holdings, including serial number, weight, and purity. Some go a step further by publishing real-time, or near real-time, proof of reserves, giving people an ongoing window into whether the digital tokens remain fully backed.

This question of trust sits at the heart of how the wider industry is now thinking about the asset class.

Matthias Tauber, managing director and senior partner at Boston Consulting Group, observed, “The question is no longer whether gold will be digital. It’s how it can participate in modern financial systems without compromising physical integrity.”

How Ownership Actually Works

For an everyday investor, the process of getting involved with tokenised gold is surprisingly straightforward. Most platforms allow users to purchase tokens using either traditional currency or cryptocurrency. Once purchased, the tokens sit in a digital wallet, similar to how you might hold Bitcoin or Ethereum.

From there, the tokens can be used in several ways. They can simply be held as a long-term store of value, much like owning physical gold but without the storage headaches. They can be sent to other people anywhere in the world in minutes, regardless of time zones or banking hours. They can also be sold back to the issuer, or traded on cryptocurrency exchanges for other digital assets or cash.

Interestingly, many tokenised gold products allow holders to redeem their tokens for actual physical gold, provided they meet certain minimum quantity requirements. This means the digital token is not just a representation, it carries a real claim that can be converted back into the tangible asset whenever the holder chooses.

Plugging Into Decentralised Finance

One of the most transformative aspects of tokenised gold is how it connects to the broader world of decentralised finance, often shortened to DeFi. DeFi refers to a growing ecosystem of financial services, including lending, borrowing, and trading, that operate without traditional banks or financial institutions acting as middlemen.

Since tokenised gold exists on a blockchain, it can plug directly into these DeFi platforms. Someone holding tokenised gold could use it as collateral to avail a loan in a digital currency, without ever selling their gold.

They could provide it to a lending pool and earn interest from other users who borrow against it. They could swap it instantly for other digital assets on decentralised exchanges, all without needing approval from a bank.

This idea of gold actively working within financial systems, rather than sitting passively in a vault, is exactly what industry leaders are now pushing toward.

Tait has spoken about infrastructure that would let participants ‘pass gold digitally around the gold ecosystem, as collateral, for the first time’, pointing out that gold has traditionally been viewed as a static, unyielding asset with untapped potential.

This is a genuinely new development in financial history. For the first time, an asset that has represented stability and tradition for millennia can now actively participate in fast-moving, programmable financial systems, all while the underlying physical gold remains safely locked away in a vault.

A World Where Everything Is on Chain

To really appreciate where tokenised gold might be heading, it helps to zoom out and look at a much bigger trend reshaping technology, the Internet of Things, or IoT. IoT refers to the growing network of everyday physical objects, from refrigerators and thermostats to shipping containers and factory machines, that are connected to the internet, and capable of collecting and exchanging data automatically.

Right now, most of this data sits in private company databases, isolated from each other and largely invisible to the public. But a powerful idea is gaining momentum. What if these devices could record their data directly onto a blockchain, creating permanent, verifiable, and shared records that anyone could check?
Imagine a vault holding gold reserves equipped with IoT sensors that continuously measure weight, temperature, humidity, and even motion. Instead of relying solely on periodic human audits, these sensors could feed real-time data straight onto the blockchain, automatically confirming, moment by moment, that the gold backing each token is exactly where it should be. A sudden change in weight could trigger an automatic alert, or even pause trading of the related tokens, all without a single human needing to intervene immediately.

This is part of a much larger shift that many technologists believe is coming, a future where blockchain becomes the invisible infrastructure connecting almost everything. Shipping containers could log their location and condition as they cross oceans, with smart contracts automatically releasing payments once goods are confirmed delivered in good condition.

Solar panels and electric vehicle batteries could trade excess energy with neighbours automatically, with payments settling instantly on a blockchain. Supply chains for food, medicine, and electronics could become fully transparent, with every step from factory to shelf permanently recorded and impossible to fake.
In this kind of world, tokenised gold is not an isolated experiment. It is an early example of a much broader pattern, physical things and real-world data being represented, verified, and exchanged through blockchain technology, often with little or no need for human middlemen. Gold just happens to be one of the first and most natural assets to make this leap, given how closely its value has always depended on questions of authenticity, location, and trust.

Why This Matters for Global Financial System

The importance of tokenised gold extends well beyond convenience for individual investors. On a global scale, it represents a meaningful step toward democratising access to an asset that has historically been difficult for ordinary people to own in meaningful quantities, especially in regions with limited banking infrastructure.

In many parts of the world, buying and securely storing physical gold is simply not practical for the average person. Tokenised gold removes that barrier. Someone with just a smartphone and an internet connection can own a fraction of a gold bar, something that would have been unthinkable a generation ago.
It also offers a potential hedge against currency instability. In countries where local currencies are volatile or where access to stable foreign currencies is restricted, tokenised gold provides an alternative way to preserve value, all while remaining liquid and easily transferable.

From a broader financial systems perspective, tokenised gold represents a bridge between two worlds that have often operated separately, traditional commodity markets and the emerging digital asset economy.

As more real-world assets, from real estate to bonds to commodities, follow gold’s lead and become tokenised, and as IoT devices increasingly feed real-world data onto blockchains, we may be witnessing the early stages of a fundamental shift in how value itself is stored, verified, transferred, and used.

Tokenised gold has taken one of humanity’s oldest and most trusted assets and equipped it with the speed, accessibility, and programmability of modern digital finance. It does not ask people to abandon what gold has always represented, security, permanence, and tangible worth. Instead, it simply gives that value a new way to move through the world.

As physical objects become increasingly connected, and as more of the data and assets that matter to our lives find their way onto blockchains, tokenised gold offers an early glimpse of what this future might look like, one where trust is not just promised by institutions, but continuously demonstrated by the technology itself.

The post Gold Gains Mobility In Blockchain Age appeared first on International Finance.

None of these AP staff chose a career in finance to do that work. And increasingly, they will not have to. That’s precisely where fear arises: If AI can do all of those tasks, what is left? The anxiety is understandable.

However, as someone who builds the AI systems that power these workflows, my perspective is that AI is not coming for AP jobs. It is coming for the parts of the AP job that nobody actually wants to do.

Accounting is deterministic, AI is probabilistic

Accounting, at its core, is a deterministic discipline. A VAT calculation either conforms to the rules or it does not. There is no “probably correct” in a set of audited accounts.

AI works differently. Every prediction an AI model makes has a probability attached to it. Even the most capable models available today are fundamentally probabilistic systems. They infer and predict. They surface the most likely answer based on patterns learned from historical data.

In most domains, that is fine and often remarkable. In accounting, it creates a specific and important gap because the output of an AP process can not live in a world of probabilities. It lives in a world of certainties. A model might correctly extract and match invoice data at an impressive rate, genuinely transforming the economics of AP operations. But in a business processing hundreds of thousands of invoices a month, even a small error rate produces a meaningful volume of items where humans need to step in, understand the context, apply the rules, and take accountability for the answer.

High automation rates and human oversight are not contradictory ideas. They work together.

This is the second disruption in finance

Decades ago, businesses ran their accounting operations with literal floors of office workers performing calculations by hand. When automated software arrived, it did not just speed things up, it eliminated that layer of work entirely. Despite this, finance did not collapse as a profession. It grew. Those who adapted moved into new roles involving analysis, forecasting, and decision-making that the software could not handle. What looked like the end of a job role at the time turned out to be the start of a more valuable one.

AI in Accounts Payable is the same story, one chapter later. The manual invoice keying, the approval chasing, the statement reconciliation – this is today’s floor of clerks and AI is clearing it.

While independent research and real-world practitioner experience show that AI substantially reduces the volume of manual processing, it does not eliminate the need for human involvement. It simply concentrates it.

When execution becomes cheap, judgment becomes valuable

There is a useful principle that keeps showing up across different professions touched by automation: As the cost of execution falls, the value of judgment rises.

When invoice routing and matching become largely autonomous, AP professionals can stop spending their days on process and start spending them on decisions. They have more time to ask important questions.

Which vendor relationships need attention? Where is cash sitting unnecessarily? Which exception requires escalation? Which anomaly is a data error, and which one is a fraud signal worth investigating?

With AI handling the analytical burden, AP teams can spend their time on quality control, stakeholder relationships, and compliance. This is work that directly drives spend optimisation and better financial control.

Where human value grows

● Cash flow and working capital: When AP teams are not buried in processes, they can engage more meaningfully with treasury. AP moves from a downstream processor to an active contributor to liquidity strategy.
● Supplier risk: AI is good at flagging anomalies. It is not good at interpreting them (yet). Business context, supplier history, and relationship knowledge still sit with people, meaning trust remains human-led.
● Complex exceptions: Real-world AP contains ambiguity: partial deliveries, pricing disputes, contract interpretation, non-PO service invoices. These are precisely the situations where experienced AP professionals earn their place.
● Controls and accountability: Someone needs to define the policies AI agents operate under and audit their decisions. When an AI system approves a fraudulent invoice, the algorithm is not accountable. Finance teams require human ownership of the process.
Practical steps for AP professionals to thrive in the AI era
● Build basic AI literacy: Understand how the model extracts data, matches invoices, and flags exceptions. That knowledge makes you incredibly difficult to replace.
● Own the exceptions: Somewhere between 2% and 7% of invoices or transactions will consistently need human judgment, regardless of how good the automation is. Become the expert who resolves disputes, interprets ambiguous contracts, and applies context that a model cannot infer.
● Get involved early: AP professionals who contribute to how systems are configured report the highest job satisfaction and see the fastest improvements in their teams.
● Strengthen relationships: Use the time you save to deepen ties with suppliers, treasury, and procurement. Relationships cannot be replaced by AI.
● Move up, not out: Once AI has automated processes, the AP professionals who matter most will be the ones who understand cash flow, supplier strategy, and compliance well enough to make decisions on information that AI can only surface. Start building that knowledge now.

Will some entry-level, manual roles disappear? Yes, and it is important to acknowledge that directly. However, the skills that made someone effective at AP are not obsolete. They will become the foundation for overseeing a more powerful system.

Done well, AI transforms AP from a transaction processing function into a source of financial intelligence. The tools handle scale while people handle consequence.

Don’t ask whether the floor of clerks is being cleared out, ask what your teams are doing with the space this creates.
ENDS/

The post Will AI replace AP teams or make them even more valuable? appeared first on International Finance.

Settlement cycles stretch across hours, sometimes days. Systems reconcile data after the fact. Liquidity gets locked in transit. And behind it all, multiple ledgers attempt to reflect the same transaction, often requiring layers of verification to confirm what should already be known.

For decades, this worked. It was reliable, regulated, and predictable. But now, that model is being quietly challenged, not by disruption at the edges, but by a structural rethink of how money itself should move.

Financial institutions are beginning to explore something that, until recently, sat firmly in the realm of experimentation: tokenised cash and programmable money. What started as a blockchain curiosity is now evolving into a serious attempt to redesign the underlying rails of finance.

And unlike past waves of innovation, this one is not being driven solely by startups or crypto-native firms. It’s being built from within the system itself.

Why now? A system under pressure

The timing is not accidental. Across the financial ecosystem, pressure has been building. Transaction volumes are increasing. Markets are becoming more interconnected. And expectations around speed driven by digital platforms in every other industry are starting to reshape what institutions consider acceptable.

Anil Thapa, a fintech expert and data analyst based in Manchester, sees this shift emerging from a fundamental mismatch between infrastructure and demand.

“A lot of the current infrastructure is still built around older assumptions. Separate ledgers, delayed updates, and manual reconciliation between parties. That works, but it creates inefficiencies that become more obvious as transaction volumes increase and as markets demand faster execution,” he told International Finance.

At its core, the issue is not just speed: it’s duplication.

Financial institutions often end up keeping their own versions of the same data, only matching things up after the transaction is done. It’s built that way for trust, but it does slow things down.

Tokenised cash offers a different approach. Instead of each participant maintaining its own record, transactions can exist on a shared ledger, visible and verifiable in real time.

“Instead of each participant maintaining its own ledger and then reconciling later, everyone is effectively looking at the same state in real time. From a data perspective, that’s a big shift; it improves transparency, reduces duplication, and makes audit trails much cleaner,” Thapa explains.

That shift from fragmented records to a shared source of truth is one of the key forces driving institutional interest.

From concept to implementation

What makes this moment different from earlier blockchain experiments is that the conversation has moved beyond theory.

Emma Landriault, Executive Director working on JPM Coin at JPMorgan, describes a growing demand from institutional clients, not for abstract innovation, but for practical, integrated solutions.

“We see growing interest from large institutional players who want more native on-chain cash solutions from pre-eminent and reputed financial institutions. These institutions typically participate actively in both crypto and real-world asset digital transactions, which is why native on-chain deposit-based cash solutions fit well with their needs,” she told International Finance.

In other words, the infrastructure around digital assets is expanding, but without a corresponding form of digital cash, the system remains incomplete. Tokenised deposits aim to fill that gap.

Unlike stablecoins, which are typically issued by non-banks and backed by separate reserves, deposit tokens are tied directly to regular bank deposits. They operate within the same regulatory and liquidity rules as regular banking, which makes them familiar and easier for institutions to use as part of their everyday financial operations.

“A deposit token is a digital representation of a bank deposit that operates on blockchain networks, designed for institutional use cases. Institutional clients can treat deposit tokens in the same way they would treat a traditional bank deposit on their balance sheet,” Landriault explains.

That distinction matters. It means tokenised cash is not positioned as a replacement for existing systems, but as an extension, one that integrates with treasury management, accounting, and liquidity frameworks already in place.

Who is already using tokenised cash?

Several large financial institutions have already started testing, and in some cases using, tokenised cash in real-world settings.

So far, the push has mostly come from big global banks, especially on the institutional side. Use cases are showing up in areas such as cross-border payments, treasury operations, and digital asset transactions.

For instance, platforms such as JPM Coin are being used by institutional clients to move money between corporate accounts more efficiently, cutting down the time it takes to settle transactions.

This hasn’t happened overnight. The groundwork has been there for a while, but it’s really only in the last few years that things have started to pick up pace. What used to be small pilot projects are gradually turning into something more real, as the tech improves and institutions get more comfortable using tokenised cash.

The response has been fairly steady. On the inside, teams working with these systems are already noticing improvements – less time spent on reconciliation, better visibility into transactions.

For clients, particularly large ones, the appeal is straightforward: faster settlement, more control over liquidity, and the ability to plug into existing systems without having to overhaul everything.

That said, adoption is still cautious. Most institutions aren’t replacing their current systems just yet. They’re running these alongside what they already have.

Efficiency beyond speed

Much of the conversation around tokenised money focuses on speed, faster payments, instant settlement, and real-time transfers. But the more meaningful impact may lie elsewhere in how capital is used.

“In traditional systems, settlement delays mean capital is often tied up for a period of time, even after a transaction is agreed. That creates inefficiency, especially at scale,” Thapa notes.

When transactions settle instantly, capital is no longer stuck in limbo. It can be redeployed immediately, improving liquidity and reducing risk.

There’s also the question of certainty. In today’s systems, the completion of a transaction often involves multiple stages, execution, clearing, and settlement, each introducing potential delays or points of failure. Tokenised systems collapse those stages into a single, atomic process.

“Tokenised money allows transactions to settle almost instantly, and more importantly, allows both sides of a transaction to complete simultaneously. That removes a lot of the uncertainty and risk that exists today,” Thapa noted.

For institutions operating at scale, those incremental efficiencies add up. They reduce the need for intermediaries, simplify post-trade processes, and eliminate much of the operational overhead tied to reconciliation.

When finance stops sleeping

If tokenised cash really takes hold, it could start to quietly change how markets function day to day.

Today, financial systems are structured around time, trading hours, settlement windows, and batch processing cycles. Even in an increasingly digital world, these constraints remain. But programmable, tokenised money introduces the possibility of continuous operation.

“Do you see programmable money enabling truly 24/7 financial markets?” is no longer a hypothetical question; it’s becoming a design consideration.

Thapa believes the implications could be significant.

“When settlement becomes instant, and systems operate continuously, the delay between decision and execution effectively disappears. That should improve liquidity, since capital is no longer sitting idle waiting for settlement,” he added.

At the same time, continuous markets introduce new dynamics.

Faster reactions can improve efficiency, but they can also amplify volatility. Without natural pauses in the system, markets may become more sensitive to real-time information.

“There’s also a structural shift for institutions. Many existing processes are built around defined operating hours. Moving to a 24/7 model requires a different approach to liquidity management, risk monitoring, and even staffing,” Thapa said.

Programmability: The real shift

While tokenisation improves infrastructure, programmability changes behaviour. Money, in this setup, isn’t just sitting idle anymore; it can actually “do” things, carrying instructions and acting on them when certain conditions are met.

So a payment might go through the moment a contract is fulfilled, collateral can shift on its own, and liquidity can move depending on what’s happening in the market.

“Yes, and I think this is where things start to get really interesting. Transactions are no longer just instructions; they can carry conditions and logic,” Thapa noted.

When combined with data and artificial intelligence, the implications expand further. Over time, these systems may move beyond fixed rules and start adjusting on their own, reacting to changes as they happen.

“Over time, I expect this to evolve into more autonomous systems where both execution and decision-making become increasingly automated,” he emphasised.

This is where the idea of ‘programmable money’ begins to feel less like infrastructure and more like an operating layer for financial activity.

Risks in a code-driven system

With that shift comes a different kind of risk. Traditional financial systems are built to manage delays, human errors, and operational inefficiencies. Programmable systems introduce new vulnerabilities, ones tied to code, data, and automation.

“The nature of risk changes quite a bit. Instead of dealing mainly with delays or manual errors, the focus shifts to system design, code quality, and data reliability,” Thapa said.

Smart contracts, once deployed, execute automatically and often irreversibly. A flaw in logic can scale quickly, with consequences that are difficult to unwind.

Then there is the question of how reliable the data actually is. These systems depend on outside inputs to make decisions, and if that data is wrong or tampered with, the results can go off track just as quickly.

Add AI into the mix, and things get more complicated. Questions around model behaviour, transparency, and whether decisions still reflect what’s happening in the real world start to matter a lot more. The emphasis, as Thapa puts it, shifts toward proactive risk management, testing, validation, and continuous monitoring.

Bridging old and new

Despite the momentum, tokenised finance is unlikely to replace existing systems overnight. In fact, the near-term reality is more hybrid than transformative.

“Tokenised financial infrastructure is no longer theoretical. However, parallel financial infrastructure will co-exist for years to come,” Landriault said.

Legacy systems are deeply embedded, and institutions cannot simply abandon them. Instead, the focus is on integration, connecting new technologies with existing frameworks.

“Scalable, institutional-grade capabilities will be the result of incremental adaptation over the years ahead, rather than overnight transformation,” she added.

This gradual approach reflects both technical and regulatory realities.

One of the bigger hurdles is still getting different systems to talk to each other smoothly. Rules and regulations are also catching up, trying to make sense of new forms of money. And for institutions, there’s the added task of investing in the kind of infrastructure that can actually connect all of this.

As Thapa puts it, the system is “progressing, but not fully there yet.”

A layer, not a replacement

One of the more persistent misconceptions around tokenised money is that it represents a break from traditional finance. In practice, it looks more like an evolution.

“I tend to see it more as an evolution of financial infrastructure rather than a completely new concept. Most institutional work in this space is focused on improving existing systems using tokenisation, not replacing them,” Thapa added.

That distinction is important.

Tokenised cash is not coming up on its own; it is growing alongside things like CBDCs, stablecoins, and the systems already in place today, each serving its own purpose. Over time, these pieces could start fitting together, shaping a more connected and flexible financial system.

The post Why the way money moves is being rethought appeared first on International Finance.

Over the past few years, insurers have been moving deeper into private credit and alternative assets. It is not always obvious from the outside, but the scale is growing. Deals like American International Group partnering with CVC Capital Partners, or increased activity from firms such as Oaktree Capital Management, are part of a broader pattern.

Insurance capital is flowing into areas that used to be dominated by banks or specialised lenders. That raises a slightly uncomfortable question: are insurers still playing it safe, or are they quietly stepping into the world of shadow banking?

It’s not just about chasing yield

At first glance, it is easy to say insurers are just looking for better returns. Bond yields have been low for years. Naturally, they are exploring alternatives. But that explanation only tells part of the story.

According to Dr Jassem Alokla, Senior Lecturer in Finance at ARU, England, United Kingdom, the shift is being driven by a mix of factors rather than a single trigger.

“All three — opportunity, necessity, and competitive pressure are at work,” he told International Finance.

There is definitely an opportunity element. Private credit tends to offer higher spreads than public bonds, partly because these investments are less liquid and often more complex. For insurers willing to hold assets long-term, that premium is attractive. Still, the bigger issue is structural.

Life insurers, in particular, are always trying to match long-term liabilities, things like annuities, with assets that generate predictable cash flows. In a world where traditional bonds do not always deliver enough return, that becomes harder to do. So, they look elsewhere.

“Insurers aren’t just chasing yield. They’re trying to close an asset-liability mismatch problem,” Alokla explains.

There is also the fact that banks have pulled back from certain types of lending since the 2008 global financial crisis. That gap didn’t stay empty for long. Private credit funds stepped in, and insurers followed, often through partnerships with asset managers.

In a way, insurers did not just decide to enter private markets. The market shifted, and they adapted.

The shift is real, but not dramatic yet

It would be easy to assume insurers are rapidly abandoning bonds, but they are not. Traditional fixed income still dominates portfolios. Government bonds and investment-grade corporate debt remain the core. That has not changed overnight.

What has changed is the mix within that core. There is a gradual move away from purely public bonds toward private credit, infrastructure debt, and real estate lending. It is not always visible unless you look closely at portfolio breakdowns, but the direction is clear.

Alokla describes it as ‘material and rising’, but not something that overturns the whole system.

Derek Guo, Chief Legal Officer at MetLife China, sees it as even more measured.

“It is not a significant shift, but a very slight move. Life insurance is still focused on steady and long-term return,” he told International Finance.

That difference in tone is interesting. It shows how this trend isn’t being experienced in the same way everywhere. In some markets, it feels like a meaningful evolution. In others, it still looks like a small adjustment. The truth is probably somewhere in between.

So…is this shadow banking?

This is where things get a bit more complicated. If you look at what insurers are actually doing, lending to companies through private credit, structuring deals, working with asset managers, it starts to resemble activities traditionally associated with banks.

Or, more precisely, with what’s often called shadow banking. Alokla acknowledges that similarity, but with a caveat.

“Partly, in a functional sense. Their private-credit intermediation resembles shadow banking,” he says. But he’s careful not to overstate it.

Insurers don’t take deposits. They operate under strict solvency rules. They’re regulated very differently from banks and most non-bank lenders. While the activity may look similar, the framework around it isn’t the same.

Guo takes a firmer stance, especially from a Chinese perspective.

“I don’t think so. Insurance is a highly regulated industry, and capital invested in private credit is closely monitored with public disclosure,” he added.

He also points out that regulators impose limits on how much insurers can invest in these areas.

So, whether insurers are part of the shadow banking system depends on how you define it. If you focus on what they do, the comparison holds. If you focus on how they are regulated, it becomes less clear.

The risks aren’t always obvious

One of the challenges with private credit is that the risks don’t always show up immediately. Unlike publicly traded bonds, these assets aren’t priced every day. Valuations often rely on internal models. That can make portfolios look stable, even when underlying conditions are changing.

“Transparency is uneven. There is a real risk of valuation error,” Alokla said.

That does not mean insurers are ignoring risk. Many have built sophisticated systems to manage these exposures. But across the sector, the level of transparency and consistency can vary.

Liquidity is another issue. Private credit is not easy to sell quickly. In normal conditions, that is fine — insurers typically invest for the long term. But in stressed scenarios, it can become a constraint.

At the same time, the structures themselves are becoming more complex. As insurers go deeper into private markets, they are dealing with layered products, bespoke deals, and sometimes indirect exposure through funds.

Guo acknowledges that the risk profile is changing.

“This will definitely increase the risks for insurers,” he says, comparing it to traditional fixed income.

At the same time, he points to safeguards, limits on concentration, strict monitoring of assets, and regulatory disclosure requirements.

What happens when things go wrong?

The real question is not how private credit performs in good times. It is what happens when things go bad. If defaults rise or valuations fall, insurers could face pressure on their balance sheets. That might show up as lower capital ratios.

There is also the issue of liquidity. While insurers are not banks, they are not completely immune to stress. Higher-than-expected policy surrenders, or other cash needs, could force them to raise funds, possibly at unfavourable prices.

Alokla points to several possible transmission channels, valuation markdowns, liquidity strain, and broader financial linkages.

“Interconnectedness can amplify shocks,” he says.

Still, he emphasises that insurers generally have strong capital buffers. They are not starting from a weak position. Guo, speaking from a legal perspective, keeps it more straightforward.

“We have solvency ratios strictly monitored by regulators,” he added.

In other words, the system is designed to absorb stress, even if the risks are evolving.

What about policyholders?

For most people, the real concern is not how insurers invest. It is whether those investments could affect payouts, savings, or retirement products. The short answer is: not immediately.

If private credit investments underperform, the first impact is usually on insurers themselves, their earnings, their capital, and their margins.

Only in more extreme scenarios would it start to affect policyholders directly. Alokla explains that modern insurance frameworks are built with buffers.

“The risk is not zero, but protection is substantial,” he noted.

Still, as insurers take on more complex assets, the margin for error narrows. It becomes more important that risks are properly understood, and managed.

Regulators are watching, but still catching up

Regulators aren’t ignoring this shift. In fact, across different regions, there’s growing attention on private credit exposure, valuation practices, and systemic risk. But keeping up isn’t easy.

“Data and valuation gaps persist,” Alokla notes.

Private markets are, by definition, less transparent than public ones. That makes oversight more challenging. Guo, again, offers a more confident view from China.

“I think the regulator is closely monitoring liquidity and solvency. The current framework can guide investment strategy,” he added.

That difference highlights something important: regulation isn’t uniform. The risks, and how they’re managed, can vary significantly depending on the market.

Temporary shift or something bigger?

So, is this just a response to current conditions, or something more permanent? There’s no single answer.

Alokla leans toward a longer-term view. The combination of low yields, evolving liabilities, and growing private markets suggests this trend isn’t going away anytime soon. The role of insurers in credit markets is expanding, even if gradually.

Guo is more cautious.

Both views make sense. Market conditions clearly played a role in accelerating the shift. But once insurers build capabilities in private credit, and start relying on those returns, it’s not always easy to step back.

A quiet transformation

For now, insurers still look like what they have always been: stable, conservative, and heavily regulated. But underneath, things are moving. They are allocating more capital to private markets. They are partnering with asset managers. They are stepping into spaces once dominated by banks.

It’s not a dramatic transformation. There’s no sudden break from the past. But it is a shift, and one that could reshape how credit flows through the financial system.

Whether that makes insurers more resilient or introduces new risks is still an open question. What is clear is that the line between traditional insurance and shadow banking is no longer as sharp as it once was, and that is quietly becoming one of the more important changes in global finance.

The post Insurers develop appetite for risk, explore world beyond bonds appeared first on International Finance.

They did not need banking licences. Instead, they built on top of banks, quietly plugging into the system while presenting a very different face to customers. But now that model is changing.

After years of back-and-forth with regulators, Revolut finally getting its UK banking licence feels like more than just a company milestone. It’s a sign of where the industry is heading. Fintechs are no longer happy sitting in the middle. They want to run the whole show, as banks themselves.

But this is not a simple story of disruption. Nor is it a clean, linear shift. It is, as some experts suggest, something more uneven, more conditional and, perhaps, more fragile than it first appears.

Inside the numbers

To really get a sense of how big this shift is, you just have to look at what companies like Revolut are doing today.

It is no longer just a payments app. Over time, it has quietly expanded into savings, currency exchange, stock and crypto trading, and now even lending. It operates across Europe, the UK, the US, and parts of Asia-Pacific, less like a regional player and more like a global financial platform in the making.

The scale is hard to ignore. Revolut says it has around 70 million customers worldwide, with about 13 million in the UK alone. That’s massive for a company that, not too long ago, wasn’t even a bank.

Traditional banks have noticed. Over the years, many have either partnered with fintechs or invested in them, not just to compete, but to stay relevant as the industry evolves.

At the same time, more fintechs are going all in. Players like Monzo and Starling Bank in the UK, N26 in Europe, SoFi in the US, and Nubank in Latin America have already secured banking licences. This isn’t happening in one market; it is happening everywhere.

Even traditional banks are not just sitting back. Big names like JPMorgan Chase and DBS Bank are putting serious effort into digital and AI. They are starting to feel a lot more like fintechs than old-school banks.

When you step back and look at it, the gap really isn’t what it used to be. Fintechs and banks are slowly meeting somewhere in the middle.

Not a shift, but a wave

For Ron Shevlin, Chief Research Officer at Cornerstone Advisors, one of the United States’ leading independent investment consulting firms, the narrative of a sweeping transformation may be overstated.

“It’s more a wave than a shift,” he told International Finance, pointing to the influence of regulatory cycles. In his view, the current momentum is tied in part to a more accommodating political and regulatory environment, one that could easily change.

“The ‘wave’ will subside with the next change in the White House,” he said.

This framing matters. It suggests that the move toward banking licences is not inevitable, but contingent, shaped by external conditions as much as by internal strategy. Still, even a wave has direction. The direction, at least for now, is clear.

Limits of the partner-bank model

In order to understand why fintechs are moving toward licences, it helps to look at how they started.

In the early days, most fintechs did not bother becoming banks. They simply teamed up with licenced institutions, more or less ‘borrowing’ their infrastructure to get going. It helped them move fast, skip the heavy regulatory burden, and focus on building a smooth user experience.

“The partner bank model was always a workaround. A way to access banking infrastructure without the regulatory overhead. It was fine for early-stage fintechs that needed to move fast,” Shevlin explains.

But as these companies scaled, the limitations became harder to ignore.

Relying on sponsor banks, often smaller institutions, introduced friction. Product development could be constrained. Strategic flexibility could be limited. Most importantly, control was never fully in the fintech’s hands.

“If a sponsor bank changes its risk appetite, or gets acquired, or gets regulatory heat, the fintech suffers,” Shevlin notes.

In other words, the very structure that enabled rapid growth can become a bottleneck at scale.

The economics of becoming a bank

Beyond control, there is a more fundamental driver, which is ‘money’.

“Why now?” Shevlin explains: “Two reasons: the regulatory environment and profitability.”

At the heart of this is lending.

“The profits in banking come from lending. Without a licence, you cannot lend,” Shevlin noted.

This is a critical point. Many fintechs built their businesses around payments, earning revenue from interchange fees or subscriptions. But these revenue streams have limits. Margins are thin. Competition is intense.

A banking licence changes the equation. It basically changes the game for fintechs.

They can raise cheaper funds by holding deposits, move into lending products like loans and credit cards, keep more of the revenue instead of sharing it, and plug directly into payment systems. This isn’t a small upgrade; it fundamentally reshapes how their business works.

From fintech to bank

If the economics explain the ‘why’, the evolution of the industry explains the ‘how’.

According to Chris Skinner, CEO of The Finanser, the shift toward licences is particularly evident among neobanks.

“You cannot put all fintechs in the same bracket. But those who are neobanks, light banking services, have all started moving into getting banking licences in the past few years,” he told International Finance.

This distinction is important. Not all fintechs want to be banks. Payment specialists, infrastructure providers, and enterprise platforms may continue to operate through partnerships.

But for neobanks, companies that already resemble banks in everything but regulation, the move toward licences feels like a natural progression. As they make that transition, the line between fintech and traditional banking begins to blur.

“Totally,” Skinner says when asked whether the distinction is disappearing.

“There are many fintechs that are no longer fintechs. They are banks,” he added.

He cites Monzo and Starling Bank.

A changing competitive landscape

This blurring of boundaries has significant implications for competition. For years, traditional banks dismissed fintechs as niche players, useful for innovation, perhaps, but not a serious threat to core business lines. That view is becoming harder to sustain.

“It has been a slow burn,” Skinner observes, citing data suggesting that a growing share of traditional banking services is shifting toward fintech providers.

The trend is expected to accelerate in the coming years. The scale is already substantial.

For example, Revolut has millions of customers in the UK alone, and tens of millions globally. If even a fraction of those users transition to full banking relationships, the impact could be significant.

For traditional institutions like HSBC or Barclays, this is not just a competitive challenge; it is a structural one.

Technology as a differentiator

One reason fintech banks may be well-positioned to compete is technology. Traditional banks, in many cases, still operate on legacy systems built decades ago, long before the internet, let alone mobile or cloud computing. Fintechs, by contrast, started from scratch.

“The critical thing about neobanks is that they began with no legacy infrastructure. The new banks built theirs specifically to leverage today’s technologies,” Skinner explains.

This gives them an edge in areas such as user experience, product development speed, data analytics, and integration with emerging technologies like AI.
As the industry enters what Skinner describes as ‘another big change with AI’, this technological foundation could become even more important.

“The new banks have far more ability to use intelligence,” he said.

Regulation: Supportive or cautious?

If tech and money are pushing fintechs toward licences, regulation is the one thing that can still slow things down, or change the direction.

On one hand, there are signs of support. Regulators in markets like the UK have actively encouraged innovation, creating frameworks that allow fintechs to experiment and grow.

“Regulators are now pretty comfortable with fintechs. In fact, they want to encourage more innovation in finance,” Skinner said.

On the other hand, the relationship is not without tension. Things like KYC checks have actually become a sticking point, especially for fintechs trying to move from simple payments or prepaid models into full-fledged banking. Customers who signed up with minimal documentation may suddenly be required to provide detailed identification, leading, in some cases, to account closures and dissatisfaction.

At a broader level, regulatory attitudes can shift with political cycles.

“It’s a back-and-forth thing,” Shevlin notes, particularly in the US context. This creates uncertainty. What looks like a supportive environment today may not remain so tomorrow.

Do Customers Even Care?

Amid all this discussion of licences, regulation, and strategy, there is a simpler question: does it matter to customers?

Shevlin offers a blunt perspective: “Americans do not really care if a fintech has a charter or not, until that fintech fails.”

It is a reminder that, for most users, the appeal of fintech lies in experience, ease of use, transparency, and convenience. Regulatory status is largely invisible, at least until something goes wrong.

This creates an interesting dynamic. Fintechs may pursue licences for economic and strategic reasons, but the customer-facing narrative may not change much. At least, not immediately.

Not all fintechs will follow

Despite the momentum, not every fintech will or should become a bank.

“There are different paths,” Skinner says.

For example, companies like Stripe, Adyen, and Airwallex focus on payments and financial infrastructure, often in partnership with banks. For these firms, a banking licence may offer limited additional value relative to the complexity it introduces.

Even among neobanks, timing matters.

“Fintechs need to scale to a certain point before the economics make sense,” Shevlin argues, suggesting that pursuing a licence too early can be risky.

Historically, obtaining a licence has been a lengthy and expensive process, one that requires significant resources and regulatory engagement. The current environment, with faster approval cycles, may not last.

Toward a new banking landscape

Both Shevlin and Skinner see a landscape in flux, but not necessarily one that follows a single trajectory. For Skinner, the long-term vision is expansive.

“The landscape of 2035 is one where many fintechs have worked together to build a new world of global banking. It’s a brave new world,” he said.

In this vision, the dominance of traditional banks could give way to a more diverse ecosystem, one that includes global digital banks, regional challengers, and specialised fintech platforms.

For Shevlin, it is a bit more measured. This wave of fintechs chasing licences may continue for now, but it won’t be steady or last forever.

What really comes through is that this isn’t a simple disruption story. Fintechs aren’t just trying to replace banks anymore. In many cases, they are becoming them. But it is not a straight path. It is shaped by regulation, economics, timing, and all of it. Getting a licence opens doors, but it also brings new pressures.

More than anything, it shows a mindset shift. Fintechs are no longer operating outside the system; they are stepping right into it. Whether that truly reshapes banking is still an open question.

For now, what is clear is that the boundaries are changing. And in finance, as in many industries, when boundaries shift, everything else tends to follow.

The post When fintechs stop playing nice, and start becoming banks appeared first on International Finance.

This comprehensive research report provides an exhaustive analysis of the current state of Financial Crime Compliance. It synthesises the seismic operational impacts of the European Union’s implementation of the 6th Anti-Money Laundering Directive and the activation of the Anti-Money Laundering Authority in Frankfurt. It scrutinises the United Kingdom’s controversial centralisation of professional services supervision under the Financial Conduct Authority. Across the Atlantic, it dissects the aggressive extraterritorial reach of the US Department of Justice, exemplified by the historic asset cap and multi-billion-dollar penalties levied against TD Bank and the criminal convictions of cryptocurrency giants like KuCoin.

Furthermore, this report analyses emerging laundering typologies that exploit the very digitalisation intended to modernise finance, including the misuse of white-label banking infrastructure, the layering capabilities of virtual IBANs, and the terrifying efficacy of AI-enabled deepfake fraud. These vectors have necessitated a complete architectural overhaul of transaction monitoring systems, forcing institutions to abandon static rule-based systems for dynamic, AI-driven behavioural analytics. The “compliance-as-an-afterthought” model, which fuelled the fintech unicorn boom of the 2010s and early 2020s, has effectively collapsed. The forced exit of founders from major neobanks like N26 and the bankruptcy of embedded finance providers like Railsr demonstrate that regulatory resilience is now the primary determinant of commercial survival.

EU’s regulatory revolution

The operationalisation of the EU’s AML Package in 2024 and 2025 represents the most significant restructuring of the bloc’s financial defence architecture since the introduction of the Euro. Now comes the new way of handling rules, with fewer top-down orders and one clear book for everyone. It means firms across Europe face different demands than before, shaped by deeper political goals. The aim? To avoid gaps so large that they let trouble sneak through, just like what happened at Danske Bank.

Nowhere else does history shift so clearly. The AMLA era replaces the old ways of isolated national bodies working apart. Based in Frankfurt, this authority is moving fast, staffing up through 2027 while gaining real oversight tools by 2028, especially for higher-risk cases. Unlike the EBA before it, which shares advice but lacks enforcement teeth, here power flows directly, bypassing local authorities entirely. Straight oversight goes to selected risky overseas finance units, setting strict rules and major monetary penalties that target them specifically, blocking any attempt to dodge through loopholes.

Across the wider market still within national oversight, AMLA takes on a firm monitoring role, working closely with state agencies to maintain uniform enforcement of the Single Rulebook. Its funding structure reflects self-sufficiency in operations, shielded from fluctuations in political funding allocations.

From 2028 onwards, approximately 70% of its €92 million annual budget will be funded by fees levied directly on the obliged entities it supervises. The fee structure ensures that institutions creating the highest systemic risk bear the financial burden of their supervision.

The legislative twin pillars, the 6th Directive and the AML Regulation, have harmonised definitions and drastically expanded the perimeter of regulated activities. The 6th Directive codifies a unified list of twenty-two predicate offences across all member states, now explicitly including cybercrime, environmental crime covering illegal logging and waste trafficking, and tax crimes. For multinational corporations, this harmonisation removes the dangerous ambiguity where an act considered a predicate offence in one jurisdiction might not have triggered money laundering reporting in another.

The AML Regulation significantly broadens the definition of “obliged entities,” those required to perform Customer Due Diligence and file Suspicious Activity Reports. The regulatory perimeter now captures crypto-asset service providers, high-value goods traders in precious metals and cultural artefacts, professional football clubs and agents, and crowdfunding platforms facilitating peer-to-peer financing. Transparency of beneficial ownership remains a cornerstone of the EU strategy, with the new framework mandating a unified ownership threshold of 25%. A critical “risk-based” provision empowers the European Commission to lower this threshold to 15% for high-risk sectors. The directive mandates the interconnection of national beneficial ownership registers via a central European platform, closing the loophole whereby cross-border corporate structures could obscure the Ultimate Beneficial Owner. To curb the anonymity provided by physical currency, the AML Regulation introduces a Europe-wide cap of €10,000 on cash payments in business transactions.

The 6th Directive introduces stringent corporate liability provisions that directly impact the C-suite. Legal persons can be held criminally liable if a “lack of supervision or control” by a person in a leading position made the money laundering possible. For Chief Financial Officers and Corporate Treasurers, the expansion of definitions regarding aiding and abetting means executives can be prosecuted for facilitating laundering through negligence or wilful blindness. The requirement to verify beneficial ownership for all suppliers and partners necessitates a massive overhaul of vendor management systems.

UK’s supervisory consolidation

While the European Union centralises authority in a new supranational body, the United Kingdom is dismantling the fragmented supervisory regime criticised for its inefficiency. The government’s decision to appoint the Financial Conduct Authority as the Single Professional Services Supervisor marks a watershed moment for lawyers, accountants, and trust and company service providers. The move represents a fundamental shift away from professional self-regulation toward a statutory, state-controlled model of AML oversight.

The catalyst for this radical reform was the consistent underperformance of the Professional Body Supervisors, the twenty-two self-regulatory bodies responsible for overseeing AML compliance in the legal and accountancy sectors. The Office for Professional Body Anti-Money Laundering Supervision issued a damning report in September 2024 that effectively sealed the fate of the self-regulatory model. The report found that none of the assessed supervisors were fully effective in all areas of supervision; the majority showed no material improvement, with some even regressing; and there was systemic reluctance to issue fines or take enforcement action. This highlighted the inherent conflict of interest between the bodies’ representative roles and their supervisory duties.

Under the new SPSS model, the FCA will assume sole responsibility for AML supervision of professional services firms, with full operational transfer projected by 2028. The legal profession has vehemently opposed this move, viewing it as an erosion of professional independence. Concerns centre on whether a statutory regulator rooted in financial markets culture will respect the nuances of Legal Professional Privilege, the significant fees the FCA is expected to levy, and the clash between the FCA’s “rules-based” approach and the “principles-based” regulation to which the legal sector is accustomed. However, the government’s stance remains firm. The risk of professional enablers facilitating high-end money laundering outweighs the preference for self-regulation.
US’ enforcement doctrine

The United States is enforcing the existing rulebook with unprecedented aggression. Enforcement actions of 2024 and 2025 have shattered the notion that global banks are “too big to jail.” The focus has shifted from monetary penalties to structural constraints that threaten the very growth of non-compliant institutions. The guilty plea by TD Bank in October 2024 serves as a definitive case study for the modern AML failure. The bank agreed to pay over $3 billion in penalties to resolve investigations by the DOJ, the Financial Crimes Enforcement Network, and the Office of the Comptroller of the Currency.

The TD Bank case was a systemic collapse of defences, facilitated by a corporate culture that prioritised speed and cost-cutting over compliance. Court documents revealed laundering networks that operated with impunity, including one that physically dumped piles of cash on bank counters in Queens and a sophisticated network that utilised the bank to withdraw funds via ATMs in Colombia through complicit bank employees. The DOJ explicitly cited the bank’s prioritisation of growth over compliance controls, noting that for nearly a decade, the bank failed to update its transaction monitoring scenarios.

While the $3 billion fine was historic, the arguably more damaging penalty was the asset cap imposed by the OCC, preventing TD Bank’s US retail subsidiaries from growing their assets beyond the October 2024 level of $434 billion. The penalty structure represents a profound shift in regulatory strategy, as fines can be absorbed, but asset caps stagnate the business, depress stock value, and invite shareholder litigation. For a bank, the inability to grow its balance sheet is a slow-motion death sentence for its strategic ambitions. The US approach has set the tone for global enforcement, with the DOJ and FinCEN targeting not just institutions but individuals and infrastructure, with reach extending far beyond US borders.

The crisis of architecture

The years 2025 and 2026 have been a reckoning for the fintech sector. The “move fast and break things” ethos has collided violently with AML regulations, exposing vulnerabilities inherent in Banking-as-a-Service and white-label models. The result has been bankruptcies, license revocations, and forced leadership changes. White labelling allows non-bank entities to offer financial products using the license and infrastructure of a regulated provider. An EBA report published in October 2025 identified this model as a critical money laundering vulnerability, with risk stemming from the structural disconnect between the customer-facing brand and the regulated entity holding the license.

The bankruptcy of Railsr remains the cautionary tale of the sector. Railsr’s subsidiary, PayRNet, had its license revoked by the Bank of Lithuania in mid-2023 for serious AML violations, including the failure to safeguard client funds and inadequate due diligence. The revocation revealed that PayRNet had effectively lost control of its resellers and could not identify the end users of its virtual IBANs, allowing illicit flows to move unchecked through its rails.

German neobank N26 provides a vivid case study in the friction between hyper-growth and regulatory containment. Following repeated AML failures, the German regulator BaFin imposed a draconian cap on new customer acquisitions in 2021. The cap was lifted in mid-2024, but by late 2025, BaFin had reimposed restrictions, specifically banning N26 from issuing mortgages in the Netherlands due to continued compliance deficiencies. The sustained regulatory pressure culminated in a governance crisis, with investors pushing for the exit of the bank’s founders by early 2026, marking the end of the founder-led era.

The digital frontier

By 2026, the cryptocurrency landscape had transformed significantly compared to the chaotic environment of 2020. The introduction of the Markets in Crypto-Assets (MiCA) regulation in Europe, along with the global implementation of the Travel Rule, tightened privacy measures. In the United States, there was a strong crackdown on cryptocurrency exchanges through criminal cases based on financial laws. One notable exchange, KuCoin, took responsibility in early 2025 for managing unreported funds and faced charges related to the Bank Secrecy Act. The total penalties amounted to nearly $300,000,000. A federal court case revealed that KuCoin operated without the necessary permissions, marketing itself to American users while completely bypassing identity verification checks. Labelled as a “No-KYC” exchange, it allowed anonymous traders to participate from across the country. As a result of circumventing regulations, more than five billion dollars flowed in from unclear, potentially criminal sources.

A penalty of $100 million handed to BitMEX in 2025 marks another shift toward personal responsibility, with its founders ordered to serve time in a criminal capacity. It was determined that the platform deliberately ignored anti-money laundering requirements to increase earnings, handling vast sums, trillions, without any customer verification. Even as traditional exchanges grow stricter, new paths for illicit finance begin to take shape. Funds tied to Tornado Cash face US restrictions, which weakened their purpose, since major trading platforms now reject deposits linked to named mixing routes. Instead of vanishing, privacy altcoins such as Monero lose access to major platforms, shrinking the trader activity needed for broad-scale illicit flows. Lurking beneath old tactics, launderers now lean on “chain hopping,” shifting value across network borders using the latest bridge technology. These moves blur transaction links simply because paths between blocks go unnoticed for longer.

By 2026, the Financial Action Task Force’s “Travel Rule” will have become a global operational standard. In the EU, regulations mandate that all transfers of crypto-assets must be accompanied by identifying information of the originator and beneficiary, effectively applying SWIFT-style wire transfer transparency to the blockchain. This has forced Virtual Asset Service Providers to implement complex messaging protocols, creating a closed loop of regulated entities.

The new typologies of financial crime

The 2026 threat landscape is defined by the abuse of complex payment infrastructure and the weaponisation of Generative AI. Virtual IBANs are routing numbers that redirect payments to a master physical account. While legitimate for treasury management, they are a potent tool for money laundering. A criminal opens a master account with a fintech company, then generates hundreds of virtual IBANs, assigning them to shell companies. Funds flow into these virtual accounts and are instantly commingled in the master account, obscuring the origin from transaction monitoring logic. The AML Regulation now requires issuers to link every virtual IBAN to the underlying master account in centralised registries.

The “Deepfake CFO” scam in Hong Kong, which resulted in a $25 million loss, stands as the grim milestone of AI-enabled fraud. Fraudsters used deepfake technology to recreate the company’s CFO and other colleagues in a “live video conference.” By 2026, over 42% of fraud attempts are AI-driven, with deepfake “injection attacks” increasing by over 2000%. This has rendered simple video KYC obsolete, with financial institutions rushing to implement passive liveness detection and biometric analysis capable of spotting microscopic artefacts left by generative AI.

Strategic outlook

The EU Single Rulebook and the UK’s SPSS model mean that regulatory arbitrage within Europe is effectively dead, with firms needing to adopt a “highest common denominator” approach to compliance. The extension of criminal liability to executives and the aggressive prosecution of founders means that AML compliance is a direct responsibility of the Board and C-suite. Legacy systems that cannot handle virtual IBAN transparency or detect AI deepfakes are now existential vulnerabilities, with investment in RegTech no longer an IT upgrade but a license to operate. The era of “growth at all costs” has been superseded by the era of “compliant growth or no growth.” The regulatory perimeter has expanded to encircle the entire digital economy, and the penalties for stepping outside it have become existential. For financial institutions and their leaders, the message from regulators in Frankfurt, London, and Washington is unified. Compliance is the new currency of trust.

The post Europe’s compliance crackdown appeared first on International Finance.

The report provides an exhaustive analysis of the drivers behind this “sovereign pivot.” It argues that the return to gold is a rational response to a converging trifecta of systemic pressures. Fiscal Dominance in the United States, where unmanageable debt loads have constrained monetary policy and eroded the dollar’s store-of-value proposition. Geopolitical Fragmentation, exemplified by the weaponisation of the financial system and acute crises such as the 2026 Greenland diplomatic standoff. And Technological Bifurcation, where new payment rails like Project mBridge are enabling a post-dollar trade architecture that increasingly utilises gold as a neutral settlement asset.

Drawing on data from 2025, the analysis details the specific strategies employed by key institutional actors, ranging from the “stealth accumulation” of the People’s Bank of China and the logistical feats of the Reserve Bank of India’s repatriation programme, to the defensive posturing of European central banks, such as the National Bank of Poland. The evidence suggests that we are witnessing the end of the “return on capital” era for reserve managers and the beginning of the “return of capital” era, where the primary objective is immunity from seizure, sanctions, and debasement.

The age of fiscal dominance

To understand why central banks are shifting to gold with such urgency, one must first dissect the deterioration of the fiscal landscape in the United States. The traditional inverse correlation between gold and real interest rates has broken down, replaced by a correlation with US fiscal instability. We have entered the age of “fiscal dominance,” a regime where the central bank’s primary function shifts from inflation targeting to sovereign solvency assurance.

By late 2025, the United States’ gross national debt surpassed $38 trillion, a milestone that carries grave implications for the global reserve system. For the first time since the demobilisation following World War II, debt held by the public has reached approximately 100% of Gross Domestic Product (GDP).

However, unlike the 1940s, this accumulation is not the result of a temporary existential conflict but the product of structural deficits that show no sign of abating.

The most critical metric driving central bank anxiety is the cost of servicing this debt. In fiscal year 2025, net interest payments on the federal debt exploded to $970 billion, nearly tripling the $345 billion paid just five years prior in 2020. By early 2026, the annualised run rate for interest payments breached $1.1 trillion, surpassing the entire US national defence budget.

The inversion where a superpower spends more on past consumption than on future security signals a potential “Minsky Moment” for US Treasury securities. Nearly one-fourth of these interest payments flow to foreign investors, including strategic rivals like China, effectively transferring wealth abroad to service domestic profligacy. Central bank reserve managers, tasked with preserving national wealth, are increasingly viewing US Treasuries not as risk-free assets, but as certificates of confiscation via inflation.

The concept of fiscal dominance posits that when government debt reaches unsustainable levels, the central bank loses the agency to set interest rates based on economic cooling needs. If the Federal Reserve were to raise rates to combat persistent inflation, which remained sticky throughout 2025, it would cause interest service costs to spiral further, potentially triggering a sovereign default or necessitating draconian austerity.

Consequently, the market has concluded that the Fed is “trapped.” It must keep interest rates artificially low relative to inflation to alleviate the government’s debt burden, a process known as financial repression. This realisation drives the “debasement trade.” Investors and central banks understand that the only political path of least resistance for the US government is to inflate away the real value of the debt. In this environment, gold serves as the only asset with no counterparty liability and an infinite duration, immune to the printing press.

Compounding the fiscal arithmetic is the overt politicisation of the Federal Reserve. The period from 2025 to 2026 has seen an unprecedented attack on the independence of the US central bank. President Donald Trump, in his second term, has repeatedly criticised Federal Reserve Chairman Jerome Powell, going so far as to suggest his termination for failing to lower rates rapidly enough to support administration policies.

Rumours of Powell’s forced resignation circulated intensely throughout 2025, creating volatility in global markets. While legal scholars debate the President’s authority to fire the Fed Chair “for cause,” the mere existence of the threat undermines the dollar’s credibility. For foreign central banks, the Fed’s independence was the guarantor of the dollar’s value. If the Fed is perceived as “captured” by the executive branch, forced to monetise debt or fund tariffs, the risk premium on holding dollars rises exponentially.

The political friction has led to a decoupling of gold prices from traditional drivers. Historically, high nominal interest rates like the 4.25%-4.5% range seen in 2025 would dampen gold demand. However, in 2025 and 2026, gold surged alongside yields, indicating that the market is pricing in institutional risk rather than opportunity cost. As Gold Policy Advisor Ugo Yatsliach notes, central banks are preparing for a world where “dollar assets can be sanctioned, seized or devalued” by political fiat.

For decades, the standard central bank reserve portfolio mirrored the 60/40 investment strategy. Almost 60% in risk assets (equities) and 40% in defensive assets (sovereign bonds). US Treasuries were the bedrock of the defensive allocation. However, the correlation between equities and bonds turned positive in the high-inflation environment of the mid-2020s, meaning both asset classes fell together.

With US Treasuries suffering consecutive years of real losses, and facing the prospect of further issuance to fund the deficit, reserve managers are actively seeking a replacement for the “40%” defensive slice of their portfolios. Gold has emerged as the superior alternative. It offers the safety profile of a bond (no default risk) with the upside of an equity (inflation protection), without the political baggage of the US Treasury market.

Geopolitical fragmentation

While fiscal dominance provided the combustible material for the gold rally, geopolitical fragmentation acted as the spark. The era of the “Great Moderation” and global integration has given way to a chaotic multipolarity, where economic warfare has become a standard tool of statecraft.

In January 2026, a bizarre yet dangerous diplomatic crisis exemplified the volatility of the new order. President Trump renewed his administration’s interest in acquiring Greenland from Denmark, citing critical national security interests and the island’s vast mineral wealth. Unlike his previous attempts, this initiative was accompanied by coercive economic threats.

When European leaders, including the Danish Prime Minister, rejected the proposal, the US administration escalated tensions by threatening a 10% tariff on eight NATO allies, including the UK, Germany, France, and the Netherlands, unless they facilitated the transfer. The crisis intensified when rumours of a US military “reconnaissance mission” Operation Arctic Endurance surfaced, raising the spectre of an armed standoff between NATO members.

The market reaction was immediate and violent. The “Greenland Tax” was priced into every ounce of gold, pushing spot prices past $5,100. Investors and central banks fled US assets, fearing that if the US could threaten its closest military allies with economic devastation over a territorial dispute, no jurisdiction was safe. Although President Trump eventually de-escalated the military rhetoric at the Davos World Economic Forum, the damage to trust was permanent. The incident proved that the “political risk” usually associated with Emerging Markets had arrived in the G7.

The Greenland Crisis was merely the latest chapter in a narrative that began with the G7’s freezing of Russia’s foreign exchange reserves in 2022. This event remains the primary psychological driver for emerging market central banks. It demonstrated that FX reserves are not “money” in the bank, but credit claims extended to foreign powers, claims that can be cancelled at will.

The realisation birthed two distinct groups of gold buyers. The Axis of Evasion, countries like China, Russia, and Iran that are actively preparing for or currently under sanctions, for whom gold is an operational necessity to bypass the US dollar system, and The Strategic Hedgers, countries like Saudi Arabia, Brazil, and India that are technically US partners but wish to maintain strategic autonomy, diversifying not to attack the dollar, but to insulate themselves from becoming collateral damage in US foreign policy disputes.

The US administration’s willingness to use the dollar as a cudgel, imposing tariffs on allies and sanctions on rivals, has accelerated “de-dollarisation” from a theoretical concept to a practical urgency. Central banks are responding by reducing their holdings of US Treasuries and recycling trade surpluses into gold.

China, for instance, has reduced its US Treasury holdings from $1.3 trillion in 2011 to roughly $765 billion by 2025, utilising the proceeds to fund its massive gold accumulation programme. Similarly, Saudi Arabia and other petrostates are increasingly settling trade in non-dollar currencies and storing the surplus in neutral assets. Gold serves as the only asset that is “politically neutral” as it carries no visa, requires no SWIFT code, and recognises no sanctions.

The great accumulation

The theoretical shift in reserve management doctrine has translated into massive physical flows. Central banks have transitioned from being net sellers of gold, a trend that persisted until 2010, to becoming the dominant “whales” of the market. In 2025, central bank purchases accounted for nearly 25% of annual global gold demand, a historic high.

Central bankers, despite their technocratic veneer, are susceptible to herd behaviour. Hugh Morris of Z/Yen Group identifies a powerful “groupthink” dynamic driving the current rush. As early movers like Poland and China publicised their gold buying, it created a “fear of missing out” (FOMO) among peers. Reserve managers faced a new reputational risk. If a crisis occurred and they held only depreciating dollars while their neighbours held appreciating gold, they would be viewed as incompetent.

This herd behaviour is creating a self-reinforcing price loop. As central banks buy, the price rises, as the price rises, the value of gold reserves increases, validating the strategy and encouraging further buying to maintain target allocation percentages.

China is the gravitational centre of the gold market. The PBoC officially reported gold purchases for 14 consecutive months through the end of 2025, adding approximately 27 tonnes per month. By December 2025, official reserves stood at 2,306 tonnes.

However, market analysts widely believe these figures understate the reality. Goldman Sachs and other forensic accountants estimate that China’s true accumulation is likely significantly higher, potentially exceeding 5,000 tonnes. The “stealth accumulation” is executed through state-owned banks and sovereign wealth funds such as the CIC to avoid spiking the market price too rapidly and to mask the full extent of China’s preparation for a post-dollar order.

The accumulation is linked to the internationalisation of the Renminbi (RMB). By backing the RMB with a “gold wall,” China aims to increase the currency’s attractiveness as a trade settlement unit. The fact that gold now constitutes 8.5% of China’s official reserves up from 3% a decade ago signals a determined strategic shift.

India’s strategy in 2025 was defined by repatriation. In a logistical operation shrouded in secrecy, the RBI moved over 100 tonnes of gold from the Bank of England’s vaults in London back to domestic storage in India. By September 2025, the RBI held over 65% of its 880-tonne reserve domestically, up from just 38% in 2022.

The decision was clearly motivated by the lessons learnt from the sanctions imposed on Russia. The assets held abroad are assets at risk. The RBI’s governor and analysts cited the need to “insulate” India’s wealth from geopolitical freezing risks. Furthermore, despite high prices, the RBI continued to accumulate gold, aiming to raise the metal’s share of forex reserves to 20%. This demand was price-inelastic. The strategic imperative of sovereignty outweighed the tactical consideration of buying at all-time highs.

The most aggressive buyers relative to GDP have been the Eastern European nations on the frontline of the NATO-Russia tension. The National Bank of Poland (NBP) aggressively bought gold throughout 2025, surpassing the holdings of the European Central Bank (ECB) and reaching over 550 tonnes. NBP Governor Adam Glapiński has explicitly linked this buying to national security, stating that gold ensures Poland’s creditworthiness even if it were cut off from the global financial system during a war.

Similarly, the Czech National Bank (CNB) has engaged in 33 consecutive months of buying, targeting 100 tonnes by 2028. These nations are buying for existential hedging. They are preparing for a scenario where the Euro or Dollar payment systems might fail them in a moment of supreme crisis.

The Central Bank of Turkey remains a relentless buyer, adding to reserves for 28 consecutive months, using gold as a tool to manage the Lira’s volatility and as ultimate collateral for the banking system. The Monetary Authority of Singapore has accumulated significant gold to balance its massive equity portfolio, highlighting in 2025 gold’s role as a stabiliser in a “high-risk” global environment. Switzerland’s Swiss National Bank, while not actively buying new tonnage in the same volume, reaped a windfall of CHF 36 billion in 2025 solely from the revaluation of its massive 1,040-tonne holding, a success story that has served as a potent advertisement for gold’s utility to other central banks.

Architecture of post-dollar trade

The gold rush is not taking place in a technological vacuum. It is intimately linked to the development of new cross-border payment systems designed to bypass the US dollar and SWIFT. In these architectures, gold is evolving from a passive asset sitting in a vault to an active settlement token.

Project mBridge is arguably the most significant development in global finance that the general public ignores. Originally a collaboration between the BIS and the central banks of China, Hong Kong, Thailand, and the UAE, it allows for direct peer-to-peer exchange of Central Bank Digital Currencies (CBDCs).

In late 2024, the BIS withdrew from the project, leaving it under the operational control of China and its partners. It’s a move that signalled the platform’s transition from “pilot” to “geopolitical tool”. By late 2025, mBridge had processed over $55 billion in transaction volume, a staggering 2,500-fold increase since its inception.

The platform allows, for example, a Thai company to pay a UAE supplier in Digital Yuan (e-CNY), which the UAE firm can immediately convert to Digital Dirham or hold. Crucially, the system supports “payment versus payment” (PvP) settlement without using a US correspondent bank. This eliminates the risk of US sanctions blocking the trade.

Where does gold fit in? In a multi-CBDC arrangement, trade imbalances inevitably arise. If the UAE accumulates too much e-CNY, it may want to swap it for a neutral asset. mBridge’s architecture is being designed to integrate tokenised gold as a bridge asset. Gold becomes the “reference unit” that clears the ledger, effectively remonetising the metal for the digital age.

The expanded BRICS bloc has explicitly called for a non-dollar payment system, dubbed “BRICS Pay”. While skeptics dismiss the idea of a single “BRICS currency” due to the economic disparities between members, the bloc is coalescing around a “Unit of Account” model backed by a basket of commodities, primarily gold (40%) and oil.

Russia and China have already operationalised the digital rouble and digital yuan for bilateral energy trade. BRICS Pay aims to link these domestic payment systems. The threat of 100% tariffs from the US administration on countries abandoning the dollar has only accelerated this development. Member nations realise that to survive such economic warfare, they need a settlement medium that the US cannot touch. Physical gold, stored domestically and tokenised on a permissioned ledger, provides exactly that capability.

The private sector is also anticipating this shift. Tether, the issuer of the world’s largest stablecoin (USDT), accumulated approximately 27 tonnes of gold in Q4 2025, valued at $12.9 billion. The move aligns with Hong Kong’s strategic initiative to establish a 2,000-tonne gold storage facility to support digital asset backing.

The convergence of stablecoins and gold reserves hints at a future where private digital currencies are backed not by US Treasury bills (as is currently the case) but by gold. This would further drain liquidity from the US bond market and channel it into the bullion market, creating a “digital gold standard” running parallel to the fiat system.

The new gold standard

The synchronised pivot to gold by the world’s central banks is a structural realignment of the global monetary order. It represents a vote of “no confidence” in the current fiat-based financial architecture, specifically the dominance of the US dollar.

The events of 2025 and 2026 have redefined what constitutes a “safe asset.” For fifty years, “safety” was synonymous with US Treasuries, liquid, interest-bearing, and backed by the hegemon. Today, “safety” is defined by sovereignty. An asset is only safe if it cannot be frozen, sanctioned, or debased by a foreign power. Gold is the only asset that meets this criterion. US Treasuries, subject to fiscal dominance and geopolitical weaponisation, do not.

As the US debt spiral continues, $1.1 trillion in interest and growing, and geopolitical fragmentation deepens (Greenland, Ukraine, Taiwan), the demand for gold will likely intensify. The emergence of digital rails like mBridge will operationalise this gold, moving it from the vault to the settlement ledger.

We are witnessing the birth of a de facto Gold Standard. Central banks are building a “gold wall” to protect their economies from the storms of the 21st century. In this new era, gold is the ultimate currency of freedom.

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