Scioencelovers - The latest news, Russia has been banned from the SWIFT network system after the invasion of Ukraine. So, what is SWIFT and ...
What is SWIFT?
Some people may have heard the word SWIFT, but many of them don't know what SWIFT is.
SWIFT stands for "Society for Worldwide Interbank Financial Telecommunications". That is, it is a global messaging network that banks and financial institutions use to send information.
With this, information sent and received will occur quickly, accurately and securely, such as interbank money transfer instructions across countries.
Throughout 2021 alone, this global network has more than 11,000 global members and sends around 42 million messages per day.
Although this global network looks like the “mother” of all global financial transactions, it is not a financial institution.
SWIFT itself does not own or transfer assets, but only has the “power” to facilitate messaging and global financial infrastructure.
SWIFT Code
If you've ever heard the word "SWIFT code" when you want to send money overseas, it's the standard coding system for the identity of the bank or institution being addressed. All SWIFT members have it.
SWIFT will give each member a unique code that has 8 or 11 characters. These codes are alternately called bank identification codes (BIC), SWIFT codes, SWIFT IDs, or ISO 9362 codes.
The Time Before There Was SWIFT
Before the global network system, Telex (telegraphic transfer aka TT) was the only way to confirm messages to transfer funds globally.
Although Telex is quite good, this system still has some drawbacks, namely execution speed and low security.
Telex also does not use a coding system, so that human errors often occur in the process and take a long time.
And to overcome this, SWIFT was founded in 1973 in Belgium, aimed at operating a global network to transfer financial messages more securely, quickly and on time. And this persists to this day.
Russian ban on SWIFT Network
On Russia's attack on Ukraine, this has attracted many responses from other countries such as the US and allies in the EU region.
And at one point, the US and its allies decided to ban Russia from the SWIFT network, because the country led by Vlamidir Putin was one of its members.
This is an attempt to isolate Russia from the international banking system for trade in order for its economy to plummet.
Of course, this move became very effective to "hit" Russia because it had stopped all international transactions, triggered the volatility of Russia's native currency, the Ruble, and caused capital outflows on a massive scale.
Indeed, these joint sanctions are the harshest action against Moscow since its troops entered Ukraine.
This is expected to be a blow to countries that rely heavily on the SWIFT platform for their key natural resources businesses, such as exports of crude oil and natural gas.
The ban will also make it difficult for businessmen in Russia to make payments for export-import transactions. Investing and borrowing money abroad has become impossible.
Should You Look at Crypto?
Even so, Russia now has an alternative to the global network, namely SPFS (Financial Message Transfer System).
However, SPFS does not have a significant impact on the country because it does not have the priority and reach like SWIFT. This is still very less to sustain the condition of the isolated country.
On the other hand, this prohibition is actually still being debated by several country leaders because they still depend on oil and gas from Russia.
Directly, this will affect supplies from many countries because Russia itself is still having trouble making deliveries due to payment problems.
Should Russia look to crypto assets?
Even though cryptocurrencies like Bitcoin have limitations in terms of speed, nominal money and exchange rates, Russia can look to other cryptocurrencies.
Call it Cardano (ADA) or Solana (SOL), which currently sits included in the best blockchain networks with transaction speeds better than Bitcoin, even Ethereum (ETH).
Indeed, the Russian side itself has not made it clear what steps will be taken next. However, crypto assets certainly offer a good solution with the support of blockchain technology.
