BY DAYO ADESULU
In defiance of global economic sanctions, the Russian government has resolved the adoption of System for Transfer of Financial Messages (SPFS) and cryptocurrency to escape the ‘Society for Worldwide Interbank Financial Telecommunications’ (SWIFT) ban.
Russia Central Bank governor Elvira Nabiullina who made this disclosure said that Russia will continue global payments via an alternative to the SWIFT network.
However, experts have pointed out that Russia may also use cryptocurrencies to circumvent economic sanctions and overcome the limitations created by a SWIFT ban. This is just as local media reports surfaced on Monday that the Russian government may be working on a “one world” digital currency for global trade.
The argument that Russia may fully adopt cryptocurrency to circumvent economic sanctions and the SWIFT ban is because only 23 foreign banks are connected to the SPFS, while SWIFT has 11,000 banking members. But cryptocurrency operates through a blockchain technology that can transfer the digital currencies in second to its recipients anywhere in the world without any intermidiary.
Outing Russia from SWIFT was a major blow to the Russian economy that effectively cut it off from the global payments infrastructure. Amid the flurry of economic sanctions against the Russian banking system, the Russian ruble has plunged by roughly 30% to a record low against the U.S. dollar on the Moscow Stock Exchange.
it will be however challenging for Russia to enable a payments infrastructure that can meet all of its transactional demands globally without SWIFT and full adoption of cryptocurrency. If the reports that Russia is working on a “one world” digital currency for global trade is credible, then such initiative could be their escape route from economic sanction.
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Recall that last week, in an attempt to deter the Kremlin’s invasion of Ukraine, the United States, the European Union, and their allies removed several Russian banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT)—an interbank messaging system widely used for global fund transfers.
Since the commencement of economic sanctions against Russia, the country’s ruble has been devalued by 30 per cent to the U.S dollar.