Navigating Global Financial System Fragmentation 2025

3 Implementing safeguards can help protect the financial system’s integrity and avoid more severe consequences of excessive fragmentation without undermining state sovereignty; this report proposes two sets of safeguarding frameworks. The first framework, the Principles to Safeguard the Global Financial System from Fragmentation, establishes the core conditions necessary for maintaining essential financial systems operations and market confidence. The second, the Rules of Engagement for Responsible Economic Statecraft, lays out parameters for policy-makers and public-sector institutions to implement geoeconomic policies while still ensuring the stable operation of the global financial system. Guardrails to protect the global financial system The principles and rules of engagement laid out in this report establish a framework under which the global financial system can continue to contribute to prosperity while respecting national sovereignty. The following are the core principles on which financial services actors rely to conduct business across jurisdictions; violating them would represent a threat to the integrity of the global financial system. 1. Clearly define and uphold the rule of law to ensure impartial enforcement and predictability across the financial system The rule of law is the fundamental building block that supports the functioning of the global financial system. A sound legal system, legislative consistency, independent courts and regulatory autonomy are essential parts of a stable legal infrastructure that facilitates trust and predictability among financial market participants.49 The historical relationship between strong legal frameworks and the US dollar’s central role in global finance demonstrates that predictable rule enforcement underpins financial system stability. 2. Respect financial and physical property ownership rights to maintain trust and encourage investment, thereby fostering financial stability Private property rights align creditors’ and debtors’ incentives to keep the global financial system functioning smoothly. A government’s commitment to upholding these rights ensures that, when necessary, property seizures follow rigorous and transparent protocols and that such seizures represent exceptions to the orderly conduct of markets. Precise definitions and articulations about the cause of such seizures can signal that governments respect property rights and resort to seizure based on clear, transparent processes only. Such a foundation gives investors the confidence to accurately value assets, hold property across borders and operate consistently across the globe. 3. Avoid unilaterally expropriating sovereign assets even during times of heightened tensions or conflict Sovereign assets, in particular central bank reserves, help countries “protect against economic shocks” and support the stability of the global financial system.50 Where possible, policy-makers should consider exempting such reserves from permanent seizure or expropriation via unilateral economic statecraft to better protect the system’s integrity. Affirming a commitment to protect such assets helps policy-makers establish a set of norms and draw red lines that define the boundaries of appropriate conduct for economic policies.3.1 Principles to Safeguard the Global Financial System from Fragmentation Violating the core principles would represent a threat to the integrity of the global financial system. Navigating Global Financial System Fragmentation 25