Russia is proposing an alternate to the SWIFT global interbank payment system for the BRICs (Brazil, Russia, India, China, South Africa) grouping of emerging market nations in a move which would further ramp up de-dollarization efforts and threaten the U.S. dollar’s global hegemony.
The Central Bank of Russia (CBR) has called for a discussion with its peers on establishing an analogue to the SWIFT system which processes around $6 trillion worth of communiqués daily.
“Seriously speaking, there is no analogue to SWIFT at the moment in the world, it is unique. The only topic that may be of interest to all of us within BRICs is to consider and talk over the possibility of setting up a system that would apply to the BRICs countries, used as a backup,” Deputy Governor of Russia’s Central Bank Olga Skorobogatova said on Friday.
In August 2014, the European Parliament urged EU member states to consider disconnecting Russia from the SWIFT system as a form of sanctions due to Moscow’s alleged role in the Ukrainian conflict, however SWIFT said that “it had no authority’” to make sanctions decisions.
In December 2014, Russia’s Central Bank announced that it had launched a rival to SWIFT in its own domestic version of a payment service which was aimed at moving away from Western financial dominance.
In February, the Russian Central Bank said that over 90 banks were participating in the nation’s domestic banking payment system.
The U.S. Treasury Department has said that it continues evaluating and discussing the impacts of expelling Russia from the SWIFT interbank payment system.
However, despite these threats from the West to disconnect Russia from the system, Russia was actually awarded a seat on the SWIFT board in March.
Similar to Russia, China has also been trying to launch its own global payment system known as CIPS, or the China International Payment System, which will be used to process cross-border yuan transactions.
The launch of China’s CIPS will pave the way for internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.
CIPS, will be a global payments superhighway for the yuan and will replace an assortment of networks that make processing renminbi payments a more cumbersome process.
China’s yuan has recently emerged as one of the world’s top five payment currencies, overtaking the Canadian dollar and the Australian dollar.
The first phase of the launch of CIPS is expected to take place before December.
Russia joined the global interbank system in 1989 and has become one of the most active users globally, sending hundreds of thousands of messages per day.
SWIFT is used in Russia by around 600 Russian banks and companies, which account for approximately 80 percent of payments in the country.
SWIFT (The Society for Worldwide Interbank Financial Telecommunication) is a Belgium-based global organization that provides services and a standardized environment for global banking communicating that allows financial institutions to send and receive messages about their transactions, the system is used by most international banks. The information the system carries, including payment instructions, is securely exchanged between financial institutions. It began operating in 15 countries in 1973 and is now used by over 9,000 financial institutions in 210 countries and territories.
The BRICs grouping of emerging economies was established in 2010, when South Africa joined Brazil, Russia, India, and China in what was previously known as BRIC. The BRICs group represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP, and 30 percent of the world’s GDP based on PPP. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total.