Jakarta, CNBC Indonesia – The United States (US) and other Western countries are planning to exclude Russian banks from the international banking information network known as SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is a kind of social networking platform for banks.
The number of banks that will be excluded from SWIFT has not yet been released, but the impact is already massive. The ruble has fallen tens of percent this week against the US dollar.
In the future, if it is true that Russia is cut off from SWIFT, its exports are expected to decline sharply.
Russia has actually been anticipating the termination of SWIFT since 2014 when it invaded Ukraine and annexed the Crimea region. Russia made a new alternative, namely the System for Transfer of Financial Messages (SPFS).
As of February 2020, more than 400 Russian banks have joined the platform. Far exceeds the number of Russian banks that have joined SWIFT at around 300 banks.
However, there are only a dozen other state banks that are members of the system, including 1 bank from China. So the SPFS platform won’t help Russia much either.
China is now reportedly monitoring the situation. Russia’s break from SWIFT is expected to create a platform of its kind Cross-Border Interbank Payment System (CIPS) will accelerate its use. If that happens, the penetration of the yuan into the international world will be even deeper.
Citing the South China Morning Post (SCMP), CIPS was released in October 2015 serving international payments using the yuan as well as a clearing system that connects participating banks both onshore nor offshore.
If Russia also uses CIPS as an alternative, then the use of the yuan will certainly increase dramatically. The value of Russia’s exports in 2021 was estimated at US$ 490 billion with imports of US$ 304 billion.
Currently, data from SWIFT shows that the use of the Chinese yuan in international payments in January was only 3.2%, a far cry from the US dollar’s 39.92% and the euro’s 36.56%.
The use of the yuan is even below the pound sterling by 6.3%, even though China is the country with the second largest economy in the world.
However, the use of CIPS reportedly jumped by 58% in the January – November 2021 period to 2.68 million transactions. The transaction value reached 64 trillion yuan, or skyrocketed 83%, reports SCMP.
At the start of its launch in 2015, there were only 19 banks that used CIPS, 11 Chinese banks and the rest foreign banks. As of January this year, CIPS is reported to have had 1,280 users in 102 countries, consisting of 75 banks with direct participation, and 1,205 with indirect participation.
There are far more international CIPS users than Russia’s SPFS platform, although they are still far behind SWIFT.
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