With Russia isolated, China's system could be an alternative to Swift

WASHINGTON

The United States, Britain and the European Union have cut off Russia's five largest banks from the global financial messaging system Swift in the wake of a military operation in Ukraine. In this situation, the stakeholders think that competing parties like China can launch a campaign on the use of their own trading system to reduce the dollar-dependence on world-class international transactions. In that case, China's CIPS could be a big alternative to Swift.

The Society for Worldwide Interbank Financial Telecommunication or Swift is used in financial transactions between banks and financial institutions worldwide. It is basically an instant messaging system that notifies the customer about any transaction instantly. Most banks around the world use the Swift network to communicate with each other. It is not possible to send money directly, only online payment order can be sent. Swift is one of the most popular financial transactions in the world today. Founded in 1973, the organization is headquartered in Belgium. Swift is used as a medium of communication between more than 11,000 financial institutions around the world.

Meanwhile, CIPS is much smaller than Swift. There are only 75 banks involved. While there are at least 300 Russian financial institutions in Swift, there are only two dozen Russian companies in CIPS. The CIPS system only deals in Chinese currency. Which, of course, made the video an overnight sensation. There is considerable doubt as to whether other states will be accustomed to saying goodbye to Swift. Many people can get into trouble, especially where there is no dollar transaction.

Russia will be hit hard by international trade as five of the country's most important banks are excluded from Swift. Some economists believe that this war and the post-war period will weaken Russia's economy. This includes international profits from oil and gas production, which account for more than 40 percent of Russia's revenue. Iran seceded from Swift in 2012 as part of sanctions on its nuclear program, although many of the country's banks rejoined the system in 2016. After severing Iran from Swift, they lost half of their oil export earnings and lost 30 percent of their foreign trade.

Foreign Desk