This paper examined the critical challenges facing the international monetary system, arguing that they have created conditions for a shift from a neoliberal framework to a pluralist multipolar financial order. Using an interdisciplinary approach that blends international law and international relations, the paper provides an analysis of the current Bretton Woods-based international monetary system (IMS). It claims the IMS operates within a political order marked by American hegemony, neoliberal economic ideology, US dollar dominance, and a legalised monetary order. The paper develops a three-element framework of strategic undermining, financial statecraft and financial nationalism to interpret geopolitical financial competition between the United States and China, and assess the institutional challenges to the global monetary order. In conclusion, it advocates for a new pluralist multipolar order that accommodates various monetary regimes across different levels. For this order to emerge and endure, a minimum level of multilateral cooperation is essential. The paper proposes a multilateral framework for the future monetary order, based on the following: (1) allowing nations to consider national security in financial regulations; (2) enhancing multilateral coordination for a global financial safety net; (3) protecting global financial infrastructure for seamless functioning of payment systems; and (4) supporting development finance for least developed countries.
Policy implications
- International and national institutions and policy-makers should recognise that the transition to a pluralist global monetary system is unavoidable. Their focus should shift from maintaining the old order to creating new cooperative frameworks that can manage a world with parallel financial systems and multiple reserve currencies.
- Policy-makers should establish a multilateral framework that offers legitimate policy space for national security measures in finance while upholding principles of transparency, proportionality and non-discrimination, distinguishing genuine security actions from outright protectionism.
- Key global financial infrastructures, such as SWIFT and major clearing houses, should be insulated from unilateral geopolitical pressure through multilateral agreements to ensure their neutrality.
- Major Bretton Woods institutions like the IMF and World Bank should commit to substantial governance reforms to give emerging economies a voice and voting power proportional to their economic influence, thereby enhancing the legitimacy of these institutions.
- Governments and central banks should encourage technical and regulatory interoperability between emerging and established financial systems, beginning with cryptocurrencies, including stablecoins, multiple-Central Bank Digital Currencies and cross-border payment systems.
- A formal framework for coordination among global, regional and national financial systems and institutions should be implemented to facilitate information-sharing, joint surveillance and co-financing during critical crises, ensuring a coherent and resilient global response to financial instability.
- Multilateral and national development banks must coordinate efforts to prevent a competitive ‘race to the bottom’ and maintain standards for lending and debt sustainability.
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