The Clearing House Interbank Payments System (CHIPS) is a privately operated, large-value U.S. dollar payments network owned by The Clearing House Payments Company, whose member banks include the largest global commercial banks. It is the principal private-sector complement to Fedwire, the Federal Reserve's real-time gross settlement system, and together the two handle the overwhelming majority of wholesale dollar transfers.
CHIPS settles high-value and cross-border dollar payments — including the dollar legs of foreign exchange trades, Eurodollar transactions, and corporate treasury flows — among a relatively small number of direct participant banks. Non-participant banks access CHIPS indirectly through correspondent relationships with members, which is why correspondent banking and CHIPS access are central to discussions of dollar dominance and financial sanctions enforcement.
Originally launched in the early 1970s as a same-day net settlement system, CHIPS shifted in 2001 to a hybrid model that combines features of netting and real-time settlement: payments are released throughout the day as offsetting flows allow, with a small prefunded balance, and any residual positions are settled at end of day across accounts at the Federal Reserve Bank of New York. This design economizes on liquidity while reducing settlement risk relative to pure end-of-day netting.
For political researchers, CHIPS matters for three reasons. First, because it clears the bulk of cross-border dollar payments, control over CHIPS access is a key channel through which U.S. financial sanctions — administered by the Treasury's Office of Foreign Assets Control (OFAC) — reach foreign banks and entities. Second, CHIPS is frequently confused with SWIFT, but the two are distinct: SWIFT is a Belgium-based messaging network, while CHIPS actually moves and settles dollar value. Third, CHIPS membership concentration is often cited in debates about the structural power of the U.S. dollar and proposals for alternative payment rails such as China's CIPS or various central bank digital currency initiatives.
Example
In 2012, after OFAC designations targeting Iranian banks, foreign institutions risked losing access to CHIPS-cleared dollar payments if they processed transactions for sanctioned Iranian counterparties.