SWIFT had it all. They had the monopoly on international inter-bank transfers. They were 'the only game in town'. Then they blew it by disconnecting Iran from the international banking scene.
Suddenly people saw that SWIFT were not the reliable, neutral entity that people thought they were. I actually emailed their public-relations office way back then stating this fact. Of course, I was disregarded. "What would I know?" I was a nameless nobody after all.
Fast forward a decade or so, and there are now at least three more interbank tranfers entities available. Already they are taking business away from SWIFT. In years to come, SWIFT will decline further and further as The East becomes more and more financially important.
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SWIFT is essentially a system for structured authenticated bank-to-bank messages in which pretty much every worldwide financial institution participates - in some ways a glorified email (though with structured fields), but with sufficient security assurances that if you get a message claiming to be from the First Bank of Nigeria (FBNINGLA) "pls do XYZ with USD 100 million kthxbye" then you would actually consider it to be sufficient authorization to execute that request. You still might wait until actually getting that money from them though before passing it on, counterparty risk is a thing, but you can assume that it's actually from them and whoever is sending has the authority to act on their behalf for huge amounts of money.
If Russian institutions can't participate, it means a disconnection for the majority of international financial communications, preventing Russian banks from directly interfacing with all the thousands of banks worldwide - they will have to establish a bilateral communications protocol with some specific partners/correspondent banks (perhaps they have something arranged already) and have someone else handle the international transactions on their behalf. That's not totally devastating, but a pain in the butt, extra expenses, extra delays and extra risk for all those transactions.
Russia has also been working on a plan to run their internet disconnected from the global Internet if necessary. It sounds like they are anticipating various actions that would cause international sanctions and preparing ways to survive them.
SWIFT disconnection is discussed alongside with oil embargo and freezing a ~$1T on the US/EU accounts of Russian elite. Taken for the face value it's pretty significant; however given the history of West generally letting Russian government doing whatever, the stakes could appear to be lower.
Its significant because the US has a virtual monopoly over global banking with the SWIFT system, which is used to impose sanctions and punish our perceived geopolitical foes. The use of the SWIFT system as a cudgel has led other countries to develop their own, competing SWIFT-like systems that would not be controlled by the US. Russia, China and India have been signaling their future adoption of this system for several years.
simonblack|4 years ago
Suddenly people saw that SWIFT were not the reliable, neutral entity that people thought they were. I actually emailed their public-relations office way back then stating this fact. Of course, I was disregarded. "What would I know?" I was a nameless nobody after all.
Fast forward a decade or so, and there are now at least three more interbank tranfers entities available. Already they are taking business away from SWIFT. In years to come, SWIFT will decline further and further as The East becomes more and more financially important.
They had it all. They lost it.
quantified|4 years ago
nikivi|4 years ago
PeterisP|4 years ago
If Russian institutions can't participate, it means a disconnection for the majority of international financial communications, preventing Russian banks from directly interfacing with all the thousands of banks worldwide - they will have to establish a bilateral communications protocol with some specific partners/correspondent banks (perhaps they have something arranged already) and have someone else handle the international transactions on their behalf. That's not totally devastating, but a pain in the butt, extra expenses, extra delays and extra risk for all those transactions.
wmf|4 years ago
avmich|4 years ago
halJordan|4 years ago
[deleted]
StanislavPetrov|4 years ago
https://finance.yahoo.com/news/china-russia-india-push-forwa...
kderbyma|4 years ago
runeks|4 years ago
That’s like having your car engine break down and replacing it with a chair. Sure, you could do that, but what would be the purpose?