Written by: Bojan Pravica, founder of Elementum
For many decades, it was believed that financial assets – especially government bonds, foreign exchange reserves, and global payment systems – are a politically neutral infrastructure of the global economy. Countries could argue politically, but the monetary system continued to function. It was precisely this neutrality that was the foundation of trust in the dollar and the Western financial order.
Over the past decade, this belief has gradually but definitively collapsed. When the financial system became a tool of foreign policy, central banks began to view reserves differently. No longer just through the prism of liquidity and yield, but through the question: can we even access these funds in an extreme scenario?
In this world, gold is returning to the forefront – not as an investment, but as the only major reserve asset that cannot be frozen, blocked, or excluded from the system.
What the 'weaponization of finance' means
The term weaponization of finance describes the use of financial infrastructure – currencies, payment systems, settlement mechanisms, and reserve assets – as tools of geopolitical pressure. This is not a new idea, but its scope today is significantly larger than in the past.
When a country loses access to its own foreign exchange reserves, global payment routes, or key financial markets, this is no longer just an economic restriction. It is an intervention into the very ability of the state to operate in the global system.
Financial sanctions before 2014: a limited and targeted instrument
Before 2014, financial sanctions were generally:
- • limited,
- • targeted,
- • and often temporary.
They were directed against individuals, companies, or specific sectors. Sovereign foreign exchange reserves of central banks were considered practically untouchable. This was crucial: reserve assets were understood as the ultimate safety net that must remain outside political disputes.
This development peaked after 2022, when, for the first time in history, the foreign exchange assets of a sovereign state were frozen on a large scale. Not of companies. Not of individuals. Of a state.
The freezing of sovereign reserves was a psychological turning point. The message was not aimed solely at one country, but at all others: reserve assets are no longer absolutely safe if they are denominated in a foreign currency and stored in a foreign jurisdiction.
Regardless of the political judgment of the events, the signal was clear. And most importantly: this signal can no longer be ‘unseen’.
US government bonds are still among the most liquid and widely used financial instruments in the world. Their credit risk remains low.
However, a new risk has emerged that was not previously part of the equation: **the political risk of access**. The question is no longer whether the bond issuer will pay, but whether the holder will be able to access them.
For central banks, this is a fundamental change.
Credit vs. political risk
Traditionally, central banks weighed the following primarily when considering reserves:
- • credit risk,
- • liquidity,
- • stability of value.
Today, a new dimension is added to this: political conditionality. A risk that cannot be calculated with interest rates or credit ratings, but with geopolitical dynamics.
The task of central banks is not to optimize for average conditions, but to be prepared for extreme scenarios. Reserve assets are intended for moments when the system is not operating normally.
If, in such a moment, there is a possibility that reserves are inaccessible, then they do not fulfill their primary purpose.
Gold has a characteristic that no fiat currency possesses: it is no one else’s liability. It does not represent a debt, promise, or contract. It exists physically and definitively.
If it is stored in a domestic vault or in a politically neutral jurisdiction, access to it cannot be unilaterally restricted. This very characteristic is the reason why gold is reappearing at the center of reserve policy.
What 'unfreezable' means in practice
‘Unfreezable’ does not mean that gold is always usable or liquid at every moment. But it does mean that:
- • its ownership cannot be blocked,
- • access cannot be unilaterally cut off,
- • it cannot be excluded from the system by a political decision.
In a world where rules can change overnight, this is an exceptional characteristic.
Examples of reserve policy changes
After 2022, many countries – openly or quietly – adjusted their reserve strategies. Some increased their gold reserves, others diversified their storage, and still others reduced their exposure to certain currencies.
The common denominator is not political orientation, but the reduction of unilateral dependence.
Why this is a permanent change in risk perception
Trust in the monetary system is built over decades, but can be lost in a single event. Once it has been shown that reserves can be politically conditioned, the perception of risk is permanently changed.
Even if sanctions are not used to such an extent in the future, the memory of the possibility remains.
Why trust does not return quickly
Financial systems are based on expectations. When expectations change, they do not automatically return to their previous level. Central banks are inherently cautious institutions.
Once they adjust their strategy, they do so for the long term.
Could there be an overreaction?
Of course, there is a risk of excessive system fragmentation. Total isolation is ineffective, and no country has an interest in dismantling the global financial infrastructure upon which it depends.
Therefore, the current shifts are not radical. They are gradual, balanced, and deliberate.
The limits of using finance as a weapon
The use of the financial system as a geopolitical tool has limits. Every use increases effectiveness in the short term, while simultaneously reducing trust in the long-term neutrality of the system.
This trade-off has now become obvious.
Zoltan Pozsar, a longtime analyst of the monetary system, summarized this dynamics with the thought:
Conclusion
When money becomes a weapon, the way of thinking about reserves must also change. Central banks do not react ideologically, but pragmatically. Their goal is not to oppose the existing system, but to protect against its extreme risks.
In this environment, gold is not returning out of nostalgia, but because of its function. It is the only major reserve asset that does not require trust in another actor.
In the next article, we will look at **how alternative payment systems and regional settlements (BRICS, CIPS, local currencies) are developing alongside this** and why this does not yet mean the collapse of the global financial order, but rather its stratification.