To sanction Russia’s President Vladimir Putin’s invasion of Ukraine, a lesser-known but incredibly powerful organization known as SWIFT has joined the zeitgeist. Without it, banks around the world would not be able to do business with each other. But even before the acronym for Society for Worldwide Interbank Financial Telecommunications became widely known, competitors were emerging to break the monopoly on cross-border transactions between banks.
Founded in 1973 and connecting more than 11,000 financial institutions around the world, the Belgian messaging service allows banks to securely arrange financial transactions, around 3,500 worldwide. Co-owned by a financial company. Last year, SWIFT hosted 42 million financial messages a day. SWIFT is also affiliated with central banks such as the Bank of England, the European Central Bank and the US Federal Reserve. Efforts to replace the interbank messaging platform have been similarly undertaken by crypto geeks and rogue nations.
One of the early attempts was San Francisco-based Ripple, which was founded in 2012 as a digital asset company and is commonly associated with XRP cryptocurrencies and is worth $ 15 billion. In 2016, the company hired SWIFT’s board member Marcus Treacher as the global head of strategic accounts, and the following year, in 2017, launched RippleNet as a messaging platform similar to SWIFT, using digital assets in 2018. I repeated the transaction settlement that I made. RippleNet is openly claiming as a competitor to SWIFT.
While RippleNet struggled to keep its early users in the spotlight, Asheesh Birla, RippleNet’s general manager, has reached a record year of over $ 10 billion in network execution, about half of which is on. He states that he is running a cryptocurrency product known as Demand Liquidity.
The numbers vary widely, but SWIFT runs about $ 1.7 trillion worth of volume a day. Birla is from Silicon Valley and believes that providing a ledger for his company’s cross-border transactions is not a play of decentralization, but an improvement in the market.
“Banks took more than 20 years to wake up the Internet, but we also need to modernize our technology stack to compete,” says Birla.
Defeating the global financial Jaguar Note has never been easier. Ripple is currently being sued by the Securities and Exchange Commission over whether XRP is a security. The case remains unresolved, but Birla sees the solution as a potential benefit of RippleNet. It doesn’t share the same spirit of rebellion associated with cryptocurrency startups, and in fact considers its potential products even better suited for centralized actions such as sanctions.
“In the case of the SWIFT, many countries really needed to connect to freeze their assets,” he says. “Like these more modern payment solutions built on cryptography, if money moves in real time, you can quickly block them.”
Despite predictions from Russians trying to circumvent sanctions that crypto will explode in use, Birla begins to reach $ 50 billion in forex trading that Russia has been doing daily before sanctions. I’m skeptical of the possibility. He also points out the fact that, unlike the perceptions of some pirate systems, exchanges are mostly regulated.
Pelle Braendgaard, CEO of the crypto compliance app Notabene, said cryptocurrencies could be used as a means of evading sanctions by rogue states and engaging in illegal financial and money laundering activities, even when scope is limited. It’s sexual and has been used, but it’s not easy. ” “
The workaround is not easy as Russia is separated from the SWIFT. To use another form of financial intermediary, both parties must agree on the means. It may be easy for Russia to move its business with its allies to another rail, but the list of sympathetic responders is not long.
RippleNet does not help Russia circumvent sanctions, but the country itself and some neighboring countries are working on potential evasions.
Just days after some Russian banks got boots from the SWIFT, Elvira Nabiullina, head of the Central Bank of Russia, pitched a specially billed Sberbank financial message transfer system on behalf of the SWIFT. rice field.
The Central Bank of Russia first launched this SWIFT alternative in 2014, the same year that Russia invaded Crimea and restrictions on Russia were first discussed. Originally intended for domestic use, by April 2021, there were partners in countries that sympathized with the Russian perspective, such as the Bank of Belarus, the Armenian-based Arshidbank, and the Kyrgyz Bank of Asia in Kyrgyzstan. ..
Negotiations are also underway with Chinese banks, according to a report by the state-owned Russian news agency TASS. President Putin and Chinese President Xi Jinping are rumored to have been in contact before Russia’s invasion and have sought ways to avoid Western democracy dominating the world stage.
China has hinted at its own efforts to avoid SWIFT, and China Construction Bank has built BC Trade 2.0. This will enable 75 financial institutions to identify high-risk borrowers and offer lower interest rates to better candidates. As of February 2021, the platform promoted over $ 100 billion in lending to thousands of users, especially reducing SWIFT. Forbes Blockchain 50. Similarly, Venezuela launched Petro in 2019, a digital currency allegedly built to circumvent sanctions, supported by the country’s vast oil supply. As a result, it was immediately banned by former President Donald Trump.
Weaponized SWIFT has been treated roughly in the past before it was used for sanctions last week. In 2018, President Trump wanted to block Iran’s access, despite disagreements from European allies. Eventually, SWIFT cut off its relationship with Iranians to avoid sanctions violations.