As part of the ongoing sanctions on Russia, the U.S. Government, the European Commission (E.C.), Canada, the United Kingdom, Germany, and Italy declared that Russian banks would be removed from the SWIFT payment platform. The parties stated in a joint statement:
“By doing so, these banks will be cut off from the global financial system, jeopardizing their capacity to function internationally.” While also promising “restrictive steps” to “stop Russia’s Central Bank from using its reserves overseas in a way that impairs the efficacy of our restrictions,”
A SWIFT restriction, proposed in response to Putin’s annexation of Ukraine, is commonly referred to as a “nuclear option” since it would likely affect payments for Russian oil and gas shipments to the Western part of the world.
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Analysts believe Putin may use cryptocurrencies to avoid SWIFT (Society for Worldwide Interbank Financial Telecommunication. The President of the EC, Ursula von der Leyen, even went farther, revealing that:
“We’ll make it illegal for Russian elites to use their capital assets on our exchanges. Putin has set out on a mission to attack Ukraine, but his country’s future is what he is destroying.”
Exclusion of Russia from SWIFT
The SWIFT payment is the world’s largest financial communications system, with over 11,000 institutions using it worldwide.
The nation will lose its capacity to transfer assets and move payments between SWIFT-member institutions by excluding Russia from the system. The measure is aimed at isolating and punishing the country. In fact, without SWIFT, commercial banks and their clients would struggle to function on a worldwide scale.
Alternatives For Russia
According to several reports, Russia has been experimenting with a SWIFT replacement for some time now. In 2021, the finance minister for Russia stated that a SWIFT ban could reduce the nation’s GDP by 5%.
However, Asia Markets noted that Russia already has a choice in CIPS. The Cross-Border Interbank Payments System (CBIPS) is China’s global payment system originally announced in 2015. According to the report, over 24 Russian banks have already joined CIPS.
On the other hand, China has not precisely been clear in its decisions during the crisis, which makes it difficult to discern. However, it portrayed itself as a defender of sovereign independence, while it has been hesitant to condemn Russia’s activities in Ukraine.
Where Does Crypto Come in?
Apart from the fall in price and other speculations that have been all over the place, Russia might decide to turn to crypto to evade the restrictions. If the country takes this step, it would mean stricter regulations on cryptocurrencies. There is a lot of uncertainty as Russia has not taken any steps to avert the situation.
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