The exclusion of Russia from the SWFT system: could Cryptocurrency be the ultimate échappatoire?

Article By : Cyrine Guesmi

On the 26th of February 2022 a joint statement was issued both by the US and the EU excluding Russia from the Swift messaging system. This bold decision was taken as a result of the Russian invasion of Ukraine, the main declared motivation of this strategic move. To commence with, let us elaborate on the nature of the SWIFT system; SWIFT appellation is used to abbreviate The Society for Worldwide Interbank Financial Telecommunications. It guarantees secure transfer of money between participating banks. It operates in more than 200 countries. The governing board of the SWIFT is divided proportionally between shareholders as per the volumes of their transactions in the SWIFT. Influence in decision-making generally goes through regulatory powers (see: https://bit.ly/3vrqDEi) or through Economic Sanctions just like the ones being applied to the Russian Banks (see: https://bit.ly/3tbSMg0). As such, the country that has the biggest transaction block has the highest leverage. These sanctions include, non-exhaustively, asset seizures and freezes, export restrictions etc. Many voices, since the exclusion of Russia, have reflected on: Cryptocurrency’s potential to presenting an alternative to the current transfer of funds’ system: In fact, by being an alternative means to transfer money, Cryptocurrency has the intrinsic potential, by virtue of its nature, to be an effective medium of exchange. This is exactly where the use of centrally issued virtual assets steps in, it is the salvation path from the occidental power. It frees from the de facto oversight of the American supervision. That is done, among other means but principally, by the exclusion of dollar-based transactions (95% of the money flow). As a general repercussion, it leads to a total detachment from centralized transactions, effectuated though any kind of fiat currency regardless of its issuing authority. As for the decentralized crypto assets, Ukrainian and occidental powers are urging Cryptocurrency wallet providers to freeze payment services, WITHOUT EXCEPTION, for Russian and Belarusian wallet holders. For instance, American Express took action in that sense, it senspended “all operations in Russia.. Russian Banks will no longer work…on the American express global network”, the same was decided for Belarus. (see: https://amex.co/3JxWt6C). It is no secret that Blockchain (the technology the cryptocurrency relies upon) presents a genuine hazard to the SWIFT system. These virtual assets’ ability to provide minimal transaction fees and a transaction cleared through a distributed ledger, added to recent hacks on the SWIFT system highlight a traditional, inflexible and slow use (See: https://bit.ly/3pqNHPG) only aggravate the delicate limbo that the SWIFT system is faced with. However, the exchange platform Binance, on its statement dated on the 3rd of March, 2022 stated “We don’t think it is right for businesses or platforms to unilaterally decide to freeze populations of users’ assets. There are normal Russian citizens in London, New York. Should a bank CEO in London have the power to unilaterally decide to freeze those people’s assets? On what grounds? Just because they don’t agree with the President of their country? What happens if they also do not agree with another head of state in another country? Should they have the power to freeze all assets of citizens of that other country too? Where does this stop? For this reason, it is our understanding that we must follow international sanction lists, and not make up our own” (see: https://bit.ly/3wzm2AO).