Following Russia’s movement of troops into two separatist regions of eastern Ukraine, the U.S. and its Western allies are poised to begin rolling out a sanctions package unlike any other in terms of the scope of targeted trade and the size of the sanctioned economy.

“We in Germany are prepared to pay a high price economically — that’s why everything is on the table,” German Foreign Minister Annalena Baerbock said on Friday.

“These are some of the greatest sanctions, if not the strongest that we’ve ever issued,” Vice President Kamala Harris reiterated at the Munich Security Conference over the weekend. “It is directed at institutions — in particular, financial institutions — and individuals, and it will exact absolute harm for the Russian economy.”

Yet for all the aggressive posturing, the U.S. coalition has seemingly backtracked on SWIFT, deciding not to block Russian access to the international payments communication system. Pundits have come to refer to SWIFT sanctions as “the nuclear option.” But some policy experts say this characterization is wildly overstated, arguing instead that SWIFT sanctions wouldn’t be nearly as effective as those directly targeting Russian banks.

So why are sanctions against Russian banks still on the table, while cutting off SWIFT access has been deemed a step too far? There’s a simple answer: Removing Russian access would constitute an economic shock that U.S. politicians and corporations would rather not instigate.

There’s a more complicated and consequential explanation, however, that has to do with anxiety over the U.S. dollar’s status as global reserve currency. SWIFT sanctions, rather than being a “nuclear option” thwarting Russia, could be the first domino in a sequence of events that bolster China- and Russia-backed alternative digital payment systems. Such sanctions might also, in the long run, steer emerging markets toward blockchain-based systems that would reduce global reliance on the U.S.-centric international monetary system. Altogether, SWIFT sanctions could very well incite the dedollarization of the world economy.

Over 11,000 financial institutions spread across more than 200 countries use SWIFT to communicate payments and securities transfers. The system was launched in 1977 by a coalition of banks and headquartered in Belgium, likely in part to convey the “strict neutrality” that SWIFT purports to uphold.

But the vast majority of SWIFT transactions are settled in U.S. dollars, which helps solidify the currency’s status as the global reserve currency. This gives the U.S. tremendous influence over the world economy, allowing the federal government to borrow at discounted rates, rack up national debt that now exceeds $30 trillion and exert influence over foreign nations through punitive monetary policy. Despite the supposed neutrality of SWIFT, the U.S. wielded its influence to boot Iran from the service twice. In both cases, the sanctions had the intended consequence of hamstringing the Iranian economy by limiting international trade.

“I think most experts would say that impactful measures were the direct secondary sanctions on Iranian banks, and SWIFT was the cherry on top,” Chris Miller, an assistant professor at Tufts University’s Fletcher School of Law and Diplomacy, told Protocol.

But even U.S. allies have an uneasy relationship with SWIFT: They know their banks rely on it, but would prefer to turn toward less U.S.-centric alternatives. For instance, in a 2018 speech explaining why Europe needed a home-grown version of SWIFT, German Foreign Affairs Minister Heiko Maas said, “We must increase Europe's autonomy and sovereignty in trade, economic and financial policies.” At the time, European nations were seeking a means of conducting transactions with Iranian financial institutions in the aftermath of the abandoned nuclear deal.

For Russia and China, the need to develop SWIFT alternatives is more pressing.

Even if the U.S. chooses not to block Russia from SWIFT this time around, the threat can certainly still be used as leverage in future standoffs. Russia can look toward the example of Iran to see that oil exports would likely take a serious hit if SWIFT access were cut off. Losing access would reduce Russia’s GDP by 5%, according to estimates from the Carnegie Moscow Center. Some Russian parliamentarians have said SWIFT sanctions would be tantamount to a declaration of war.

As for China, its economy is too large and too important to reasonably be booted from SWIFT. But if China ever wants to seriously challenge the U.S. as the global hegemonic power, it will need to develop a viable alternative to SWIFT that helps wean the global financial system off the U.S. dollar. China has so far struggled to promote CNY on SWIFT, as the currency only accounts for around 2% of settlements.

Here’s the catch: Plenty of SWIFT alternatives already exist. The EU, Russia and China have each created their own systems. There are also emergent blockchain-based alternatives such as Ripple, which aim to usurp SWIFT through technological prowess rather than political influence.

The difficult part isn’t creating a new system, but gaining enough adoption such that the network becomes useful to member banks. For instance, Russia’s alternative system, SPFS, has only gained traction within the country; even then, only 20% of domestic bank settlements used it as of 2020. Only one Chinese bank belongs to SPFS. By contrast, China’s SWIFT alternative, the Chinese Cross-Border Interbank Payment System, managed to attract 613 indirect participating banks from overseas in 2021. While it may seem CIPS is better positioned to challenge SWIFT, it still has a long way to go, as it stands at around 0.3% the size of SWIFT.

The U.S. therefore risks pushing its luck too far by kicking Russia off of SWIFT, which could then incite a coalition of disgruntled nations to actually adopt alternatives. Russia and China have already offered to help the EU improve its INSTEX system, which is currently limited to facilitating humanitarian trade payments permitted by U.S. sanctions. El Salvador’s bitcoin experiment might also look more attractive within the context of a decentralized blockchain-based international payments system, should that become the more prominent SWIFT alternative. Fintech companies such as Plaid have suggested that blockchain technologies could become a faster, cheaper alternative to SWIFT.

In the long term, U.S. policy around SWIFT should, in theory, be guided by the perceived threat of dedollarization. The problem is that no one can agree on the threat level.

“The plumbing is being built and tested to work around the United States,” former U.S. Treasury Secretary Jacob J. Lew told the Atlantic Council in 2019. “Over time, as those tools are perfected, if the United States stays on a path where it is seen as going it alone … there will increasingly be alternatives that will chip away at the centrality of the United States.”

Since Lew made his remarks three years ago, inflation has risen to near-record highs. Foreign nations that invest in U.S. treasuries will therefore get a weaker dollar back over time. The fact that Russia controls so much energy also means that an escalation in the conflict would only drive inflation higher, making the dollar less attractive.

But others don’t see an imminent risk of dedollarization. “There [are] basically no data points — other than politicians’ statements in Iran, China and Russia — that suggest dedollarization is happening,” Miller told Protocol. “As U.S. sanctions on Iran and Russia have intensified over the past decade, the role of the dollar increased. So I understand that people can make the claim that that’s going to change in the future, but the evidence in the past decade is decisively that that’s not happening.”

What happens next depends on the situation on the ground in Russia and Ukraine. The Biden administration is still weighing what sanctions to impose to deter Russia’s move westward, as Congress remains conflicted. The president is expected to deliver public remarks on the matter on Tuesday afternoon.