Many countries discuss using SWIFT to sanction international remittances to Russia? Alternative options such as Bitcoin raise concerns.

As Russia continues its invasion of Ukraine despite warnings from other countries, various nations have implemented economic sanctions. Among them, Western countries have even discussed cutting off Russia's access to the SWIFT system. However, what exactly is SWIFT, and what impact will blocking it have on Russia and cryptocurrencies? Let's hear what Sahil Bloom, Vice President of Investment Management Company Altamont Capital Partners, has to say.

What is SWIFT?

SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. It is a global banking industry's financial communication infrastructure, often likened to the "Gmail of the banking world," enabling secure messaging among its members. SWIFT is headquartered in Belgium and was established in 1973 by 239 banks from 15 countries to create a method for handling cross-border payments.

Today, SWIFT connects over 11,000 financial institutions in more than 200 countries and territories, processing an average of 40 million messages daily, including orders, payment confirmations, foreign exchange, and transactions. While SWIFT does not transfer or hold funds itself, it is a critical component of the communication infrastructure that facilitates cross-border fund transfers.

However, why has it become an international focal point in times of conflict?

How SWIFT Enforces Sanctions on Countries

Although SWIFT is not a political organization, due to its significance in global fund flows, it is often considered a geopolitical tool in sanctions methods. Blocking a country's banks from SWIFT restricts the inflow and outflow of funds, causing real economic hardship.

In 2012, to penalize Iran's nuclear program, economic sanctions were imposed by blocking them from SWIFT. In 2014, during the Crimean Crisis caused by Russia, international threats were made using SWIFT as well.

Why the Delay in Imposing Sanctions?

As Russia's military actions in Ukraine intensify, the discussion of using SWIFT for punitive measures has gained international attention. However, the challenge in using this method lies in its double-edged nature, as Russia is a significant economic entity with global reach.

Russia is a major energy supplier to Europe and many countries, as well as an exporter of jet engines, semiconductors, automobiles, electronics, and key materials for fertilizers. Removing Russia from SWIFT would impact the payment processes of these industries.

Furthermore, since facing threats in 2014, Russian banks have established their own financial messaging systems for domestic and foreign banks to mitigate the economic impact of SWIFT sanctions. However, most experts still believe that the impact would be significant.

After being sanctioned by SWIFT, Russia may also generate long-term secondary effects on Bitcoin and unofficial currencies. Logically, Russia may potentially adopt other currencies to circumvent the effects of SWIFT restrictions by integrating its internal systems and moving away from the dominance of the US dollar reserve currency.

Note: Sahil Bloom did not express a preference for any specific currency adoption, only that Bitcoin is a potential option.