Written by: Bill Qian , former co-founder of Cypher & Phoenix & former Chief Investment Officer at Binance

Every war is a testing ground for innovation: tanks on the Somme in 1916, aircraft carriers in the attack on Pearl Harbor in 1941, atomic bombs over Hiroshima and Nagasaki in 1945, and drones in the Russia-Ukraine conflict in 2022 and the Middle East conflict in 2026. This time, in the Strait of Hormuz, cryptocurrency is also participating as an innovation in financial technology—showing us from another perspective that cryptocurrency's "censorship resistance" and relative "decentralization" have become a convenient method for transactions in chaotic times.

Iranians are about to start using cryptocurrencies and the Chinese yuan for settlements. I think the probability of using mainstream stablecoins like USDT and USDC is very small, because these are essentially products that the US government can freeze at will. In contrast, Bitcoin is more likely to be adopted because it is currently almost the only payment instrument in the world without "counterparty risk." Some might say that gold is also absent, which is true, but this is no longer the 19th century; nobody wants to use physical gold for transactions.

Looking at history, we can compare the situation to the 1956 Suez Canal Crisis and see how then-Egyptian President Nasser responded without Bitcoin. On July 26, 1956, Nasser announced the nationalization of the Suez Canal Company. The compensation agreement between the Egyptian government and the original shareholders stipulated that while the compensation was denominated in Egyptian pounds, actual payments would be made "at least 40% in pounds sterling, with the remainder in francs," pegged to the IMF-mandated US dollar parity. Therefore, the entire settlement system remained within the pound sterling and dollar system from beginning to end, as Egyptians also needed the then-current global "hard currency."

Britain, France, and the United States subsequently froze all of Egypt's foreign exchange assets within its borders—including the Egyptian pound sterling balance frozen in London, totaling approximately £128 million. This money remained frozen for three years. It wasn't until February 28, 1959, that Britain and Egypt signed the Anglo-Egyptian Financial Agreement, gradually resolving the issue.

Nasser won the battlefield, but the monetary war was bought with money. The deeper consequence was that in 1979, Egypt signed the Camp David Accords, becoming the first Arab country to recognize Israel. Thereafter, it received approximately $2 billion in aid annually from the United States, becoming one of Washington's most important allies in the Middle East. The dollar revenue from the canal has never been frozen again—not because Egypt found a way to circumvent the system, but because Egypt chose to join it. This was Nasser's only way out back then, but Iran today cannot choose this path.

Today's story of Iran and the Strait of Hormuz is somewhat different: Iran can threaten to block the passage, but its oil export revenues, as long as they are settled through the SWIFT and dollar systems, are always at risk of being frozen. Egypt's solution was submission, a path Iran cannot take. Therefore, Bitcoin is the first tool to truly make "bypassing" possible precisely because it lacks any politically pressured counterparty.

Three iterations of global fintech in the 70 years since World War II

Since the establishment of the Bretton Woods system in 1944, global fintech has undergone several stages of development, which can essentially be broken down into three levels: What currency do you use? What settlement system do you use? What front-end application services do you use?

Phase One (1944-1990): The reshaping of the order enabled by IT technology; the US dollar and SWIFT became the core of the postwar financial order.

The core of this phase was the reshaping of order—the United States' coronation as the "New Roman Empire," and the initial application of digital technology. Following World War II, at the monetary level, the world first adopted the US dollar; at the settlement system level, SWIFT (established in 1973, officially launched in 1977) and organizations such as Visa, Mastercard, JCB, and China UnionPay emerged; at the front-end service level, plastic cards appeared—the first credit card was the Diners Club in 1950, and the first debit card was a pilot project by Delaware Bank in 1966. Simultaneously, in 1967, a very cool financial technology emerged globally: the ATM. For a time, Japan even boasted about its level of modernization by stating "how many ATMs per 100,000 people."

It's important to note that the old paradigm didn't completely disappear during this process. In fact, until the 1960s, the traditional "hard currency," the pound sterling, still accounted for over 50% of global settlements. Therefore, the pace of change was sometimes quite slow.

Phase Two (1990-2009): At the application layer, internet technology continued to accelerate global financial efficiency, but the underlying technology remained unchanged.

Since the 1990s, the global monetary system and settlement system have remained unchanged, but a large number of innovations have emerged at the front-end application layer, such as PayPal, Nubank in Brazil, Revolut in Europe, and Ant Financial in China, which have continuously driven the improvement of financial efficiency.

Phase Three (2009 to Present): The birth of Bitcoin, cutting-edge innovation in cryptocurrency technology, creating a new paradigm of 24/7 open finance.

Driven by blockchain technology, the birth of Bitcoin in 2009 and the launch of the Ethereum mainnet in 2015 marked milestones in this phase. The key to this round of innovation, in my opinion, lies in further developing finance in terms of efficiency and freedom—being able to operate 24/7 and (relatively speaking) not become a political tool for rule-makers. This innovation is only just beginning, similar to the internet penetration rate in 1999.

First, at the monetary level: stablecoins emerged, enabling strong currencies to strategically deploy globally with the help of blockchain. Initially, this "strategic deployment" was spontaneously accomplished by grassroots entrepreneurs. For example, the founder of USDT became one of the world's top 20 richest people as a result.

Secondly, at the settlement layer: the biggest problems with the SWIFT system are twofold. First, the US can shut it down at will, making it a political tool in extreme circumstances, which are becoming increasingly common. Second, it's slow; a single cross-border transfer takes at least 1-3 business days and incurs fees of approximately $15-25. The emergence of the Ethereum blockchain network has become an alternative, providing a 24/7 global clearing and settlement network.

Third, at the application layer: This round of innovation has spawned many new species, from trading, payments, acquiring, and brokerage to new types of digital banks. Almost everything that fintech can do at the application layer is being done by the crypto industry at this stage. Examples include the 24/7 exchange Binance and the stablecoin payment card RedotPay.

So, will Iran and the Strait of Hormuz become the new landscape for the third generation of fintech globally after World War II? Let's wait and see.

Major lender Newrez plans to recognize crypto assets for mortgage lending in the United States starting in February.

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