As Russia’s attack on its western neighbour continued Friday, Ukraine begged the world for help. At the top of its list, before more weapons and cash, even before an embargo on Russian oil and gas: exiling Russia from SWIFT, a global banking network.
Prime Minister Justin Trudeau said late Friday that Canada supports the idea.
“Excluding Russian banks from SWIFT would make it even more difficult for President [Vladimir] Putin to finance his brutality,” he said. But, he added, European allies are still debating the prospect.
Here’s what you need to know:
What SWIFT is: The Society for Worldwide Interbank Financial Telecommunication is one of the world’s most widely used international payment networks, allowing thousands of banks to communicate with one another to exchange funds. Headquartered near Brussels, Belgium, the organization handles roughly half of global high-value, cross-border payments, and processed an average of 42 million messages per day in 2021.
Where key leaders stand: After initial public hesitation, the United Kingdom is calling to cut Russia out. U.S. President Joe Biden said Thursday that it’s an option, but the European Union needs to agree. It hasn’t, though Ukraine is working on holdout members.
What happens if Russia is cut out: Disconnecting Russia from SWIFT could have long-lasting implications on the global financial system, according to Andreas Park, a finance professor at the University of Toronto’s Rotman School of Business. Using the network as a political tool, he said, could encourage Russia and possibly other countries to seek alternatives in China’s system, the Cross-Border Inter-Bank Payments System (CIPS), or even in blockchain platforms like Ethereum. That would undermine the U.S. dollar’s status as the global reserve currency and leave Western governments with less influence over the financial system.
SWIFT allows banks worldwide to communicate with one another, but doesn’t actually send the money itself. That means Russian banks could still circumvent the network through less efficient means if they were cut off. “SWIFT is only one possible way money flows around the globe,” Park told The Logic.
What some of those players are saying: Russia has been deeply skeptical of cryptocurrency until now. For advocates seeking to have crypto recognized as a legitimate means of exchange, seeing it adopted by a state kicked out of the traditional global finance system wouldn’t be ideal.
Russian Canadian Vitalik Buterin, who co-created Ethereum, tweeted amid the invasion that “Ethereum is neutral, but I am not,” and (in Russian) that Putin was committing “a crime against the Ukrainian and the Russian people.” Changpeng Zhao, the Chinese Canadian CEO of the crypto exchange Binance, posted that the company was working to keep Ukrainian employees safe, including by helping them leave the country. Ukraine formally legalized crypto just a week ago.
What’s next: The EU and Britain added new sanctions personally targeting Putin and his foreign minister; Trudeau said Canada would follow suit, so Russian leaders can’t benefit from an international order they are seeking to overturn. More measures, including on SWIFT, are still being discussed.