The Great Divergence: Why Capital Is Fleeing Western Banks for Middle Eastern Capital Channels
- Afsheen Jafry
- Dec 9, 2025
- 4 min read
While the US and Europe are busy building tighter fences around their banking systems, the Middle East and large parts of the Global South are quietly building bridges.
In the West, policymakers speak the language of stability, control, and safety. In the East, regulators speak the language of access, settlement, and speed. These are not just stylistic differences. They are signals of a deeper structural split that is now unfolding inside the global financial system.
This is no longer a debate about crypto adoption. It is a contest over who controls the rails of global money.
And capital is already choosing sides.
A World Dividing in Real Time
For decades, the global financial system ran on a single dominant architecture. Dollars settled trade. SWIFT moved messages. Western banks controlled access. Sanctions worked because exclusion was absolute.
That system is now fracturing.
On one side, the West is transforming the dollar into a highly regulated, surveillance-heavy domestic product. On the other side, new neutral zones are positioning themselves as open settlement hubs for digital money that moves without political permission.
This is the Great Divergence.
It is not ideological. It is structural.
The US Strategy: Domesticate and Control
The passage of the GENIUS Act in July 2025 quietly marked a turning point in American crypto policy. Framed as consumer protection and systemic stability, the law effectively redefined the future of dollar stablecoins.
Under this framework, major issuers are required to maintain one-to-one reserves largely in US Treasuries and cash equivalents. In practice, this turns stablecoins into shadow extensions of the US banking and debt system.
This is not a war on crypto. It is financial absorption.
At the same time, the SEC’s recent pivot toward “regulatory frameworks” through initiatives such as Project Crypto signals a coordinated shift away from litigation and toward integration. Crypto is no longer being fought. It is being folded into the perimeter.
The message is clear.
Crypto is allowed to exist, but only if it behaves exactly like a bank.
For Washington, this solves two problems at once. It preserves oversight over dollar liquidity, and it creates a fresh channel of demand for Treasury issuance at a time when US debt is accelerating toward levels that historically force financial repression.
This is not decentralisation. This is domestication.
The Counter-Move: The Rise of the Neutral Zone
While the US tightens control, Abu Dhabi is quietly doing the opposite.
Through the Abu Dhabi Global Market, regulators have approved USDT across multiple major blockchains including Ethereum, Solana, and TON. In parallel, Binance has been licensed to operate its primary hub under ADGM’s regulatory umbrella.
This is not symbolic. It is infrastructural.
Unlike the US approach, which seeks to force stablecoins into a bank-like cage, the UAE is positioning itself as a neutral settlement jurisdiction. It is inviting digital capital, not absorbing it.
The contrast could not be sharper.
In the West, crypto is treated as a compliance problem. In Abu Dhabi, it is being treated as financial infrastructure.
There is a reason this matters. Capital has no loyalty to ideology. It flows to where it is treated best. And right now, for global traders, market-makers, and settlement firms, that flow is shifting East.
The Dark Matter: Sanctions and the Shadow Economy
The most powerful force accelerating this divergence is not speculation. It is sanctions.
Russia has already legalised crypto for international trade settlement. BRICS nations are actively constructing alternative payment systems such as BRICS Pay specifically designed to reduce reliance on SWIFT and dollar rails. Even mainstream Western outlets like the New York Times now acknowledge that stablecoins are eroding the effectiveness of financial sanctions.
This is not theoretical. It is operational.
Every new restriction imposed by the West increases the incentive to build parallel settlement systems that cannot be switched off politically. Stablecoins, crypto rails, and digital currencies are becoming the dark matter of global trade. Invisible to many. Structurally decisive to those who need them.
The more aggressively the traditional system weaponises access, the faster the alternative system evolves.
Control accelerates exit.
The Bitcoin Thesis: Neutral Collateral in a Fragmented World
In this bifurcating landscape, stablecoins and payment networks are multiplying. But fragmentation brings its own risk. Different blocs are building different systems, under different rules, governed by different political interests.
This is exactly the environment in which Bitcoin becomes structurally indispensable.
Bitcoin is not a payment company. It is not a jurisdiction. It is not a promise from any state. It is neutral, apolitical collateral that no government can switch off, rewrite, or confiscate by decree.
When settlement rails are weaponised and alternatives are fragmented, neutral collateral becomes the anchor.
This is why Bitcoin’s role strengthens as the financial world fractures, not when it unifies.
The Signal Beneath the Noise
The volatility dominating headlines today is distraction. It is the noise of a system in transition.
The signal is far more important.
The world is not arguing about whether crypto will be used. That question has already been answered. What is being decided now is who controls the rails, who controls the settlement layers, and who sets the rules of access.
The West is choosing control.
Large parts of the East are choosing neutrality.
And Bitcoin sits above both.
The global financial operating system is being rewritten in real time. And every major power bloc is using crypto to do it.
Afsheen Jafry | Crypto Macro Strategist | Author of "The Market That Breathes" and "Whales, Whispers and Wallets"
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Email hello@afsheenjafry.co.uk You can explore the books, ongoing research and my frameworks throughout this website. Each one is designed to help you understand the system from the inside out – not from headlines, but from the flow that actually moves the Crypto world.
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