Western nations have announced harsh economic sanctions to punish Russia for invading Ukraine, including blocking some banks from the SWIFT international payments system. SWIFT messaging systems are a critical part of international economic activity, and although being cut off won’t prevent Russian banks from carrying out cross-border transactions, it will make payments expensive and difficult and will create a reliance on old-fashioned communication tools. It will also crimp Russia’s ability to get paid for its oil and gas exports.
Kicking Russia out of SWIFT could accelerate efforts by Russia and China to create a rival payment system that does not use the US dollar. Specifically, it could benefit China’s own Cross-Border International Payment System, CIPS, and accelerate the development of the country’s digital currency, the e-CNY. Several Russian banks are already connected to CIPS.
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