Russia can handle Swift with cryptocurrencies

Russia’s exclusion from the international banking communications network Swift is considered extremely costly and is likely to have an enormous impact on European companies. Experts, meanwhile, assume that – should it come to that – Russia could simply circumvent the expulsion with cryptocurrencies.

Russia could bypass Swift

As one of the biggest possible sanctions against Russia, the country faces expulsion from the Swift international banking communications network, which is raising alarm bells among European companies.

However, any expulsion need not necessarily lead to complete financial isolation, as Philipp Sandner, an economist at the Frankfurt School of Finance & Management, told Deutsche Presse-Agentur. Russia would have two alternatives to Swift in the area of digital currencies – at least in theory.

On the one hand, the country could switch to classic cryptocurrencies; on the other hand, President Putin could try to link his country to the Chinese digital currency e-Yuan (eCNY), which only started this year.

According to Sandner, these options are conceivable, at least in the short term. Currently, the “fallback options in the direction of crypto assets such as Bitcoin and Ethereum as well as e-Yuan are still rather theoretical in nature,” Sandner, who is considered one of the leading experts on digital currencies in Germany, added.

Integration into e-Yuan difficult

The Chinese digital currency e-Yuan was launched as part of the Olympic Games and does not mark a classic cryptocurrency. As the CNBC reports, users can use it to create a digital wallet on their smartphones using the Wallet app to store digital money in it. This will then enable payments both in stores and online.

However, the digital e-yuan has so far been all about domestic payments in China. Connecting individuals and companies from abroad has not yet been an issue for the digital currency.

Sandner sees a difficulty in crypto trading, however, primarily on the part of companies: “The transfer of even large sums works. So far, however, it is mainly individuals who are involved, mainly young people who are tech-savvy. But they only make up around five percent of the population.” Companies, on the other hand, are still firmly anchored in the Swift system and are only venturing their first steps in the crypto segment to a limited extent.

Russia is prepared

Meanwhile, Ross S. Delston, an anti-money laundering compliance expert, believes that Russia has been preparing for possible sanctions in the financial sector for some time. Speaking to U.S. television network CNN, Delston said that Russia could easily “circumvent virtually all sanctions” with a complete shift to cryptocurrencies.

However, he added that a complete shift of assets into bitcoin would be much more difficult to achieve than one might think. Larger purchases with cryptocurrencies, in particular, are currently still difficult to implement, he said.

Meanwhile, Sandner makes an appeal to European politicians to deal more intensively with the topics of cryptocurrencies and blockchain. At the political level in Europe, he said, there is currently too little understanding in this area – whether bitcoin or e-yuan. “And that’s already dangerous, because then you can’t deal with it properly.”