The Russian government is experimenting with currency and blockchain-based solutions that would serve as an alternative to the SWIFT payment system, according to Russia’s deputy foreign minister Alexander Pankin. The statement, published in an interview to a government-sponsored news outlet Ria Novosti, comes during a time of uncertainty around Russia’s relationship with the west and amid fears that it will be cut off from the SWIFT payments system as punishment for recent political repressions in the country.
Pankin remarked that this effort is only in part induced by the prospect of Western sanctions, also motivated by the imperative to modernize existing payment systems by implementing more technologically up-to-date solutions.
Russia is not alone in attempting to bypass SWIFT, with Iran launching its alternative SEPAM system in 2013 response to western sanctions and China’s recent roll out of the digital yuan. Russia itself has developed the System for Transfer of Financial Messages, as a hedge against the potential of exclusion from SWIFT induced by tensions with the west in the aftermath of its annexation of Crimea in 2014.
This trend may indicate the decline of interconnected global payments systems such as SWIFT, caused by the long-term desire of some nations to decouple their payments from international institutions and made possible by blockchain and digital currencies. While having the potential to make payments more efficient, such developments have serious political and economic implications that stretch beyond the payments realm.
The introduction of alternative payment rails will likely make it difficult for western democracies to track payments across the globe, as well as weakening the power of international payment systems as tools to exert political pressure on state actors.
Overview by Sam Klebanov, Research Analyst at Mercator Advisory Group