The development of digital currencies could challenge the SWIFT international bank payment system for the US dollar and eventually make them redundant, Russia’s central bank (CBR) has said.
According to Olga Skorobogatova, deputy governor of the Russian central bank, more than 30 financial regulators are currently working on digital currencies in their own countries, and several countries may even introduce new forms of currency in the next five to seven years if the current pace continues.
SWIFT is an information network that banks and other financial institutions transmit securely via code. SWIFT enables cross-border payments and other services between more than 10,000 financial institutions worldwide. According to reports, THE US dollar SWIFT system is a cross-border payment system between 11,000 financial institutions in more than 200 countries, and the us dollar dominates the operation of the whole system. If a financial institution is cut off from the SWIFT system, the cost of sending messages across its borders will rise dramatically or become difficult to process.
At the beginning of December, The Director general of the National Payment System Department of the Central Bank of Russia, Nikolai Barkina, said that the Ouyang Economic Union will continue to promote the development of the payment system, and the focus of its work in 2021 is to promote the coordination of the payment system among the member countries of the Union, so that the payment instrument of one country can be used in all the member countries of the Union.
It is worth noting that Russia itself is also studying the central bank’s digital currency, with the news that Russia’s financial regulator is developing a digital ruble, a new form of Russian currency that should be present in cash and cash rubles and will be tested in Crimea as early as next year.
Russia is likely to welcome an alternative to SWIFT, as Russian banks have been threatened with removal from the SWIFT network as part of broader sanctions against Russia. It is now normal for the US government to impose sanctions on SWIFT and the CLEARING system of the US dollar, and there will be some way to go in the future, but one thing is certain: the current US administration is losing the credibility of SWIFT and the US dollar.
Central bank digital money is a huge improvement over existing electronic payment systems. On the one hand, in the field of cross-border settlement, the digital currency based on blockchain has raised the current SWIFT settlement time from several days to seconds, greatly improving the settlement efficiency. On the other hand, it reduces the cost of cross-border transfers. The changes brought about by technological progress cannot be suppressed by political intervention.
Therefore, once central banks’ digital currency is widely used in cross-border settlement, it will have a big impact on the SWIFT system.