The number of countries supporting Russia’s removal from the SWIFT payments system grew on Saturday, as the Ukraine invasion rages on. Focus now turns to whether Moscow will adopt digital assets to bypass crippling economic sanctions.
Growing calls for Russia’s removal from SWIFT
In a series of tweets, high-ranking Ukrainian officials said several countries, including France, Croatia and Italy all supported Russia’s restriction from SWIFT.
Call with my French counterpart @JY_LeDrian. France supports banning Russia from SWIFT. I urged to immediately introduce the third package of EU sanctions to stop Russian invasion. France is also ready to supply weapons and military equipment to help Ukraine defend itself.
— Dmytro Kuleba (@DmytroKuleba) February 26, 2022
Lithuania’s Prime Minister Ingrida Simonyte said the West and its allies were moving closer to blocking Russia’s access, Reuters reports. Canada, the United States, Britain and the European Union also recently raised the possibility of Russia’s removal from the system, as part of more sanctions.
NATO countries had blacklisted Russia’s largest banks and several members of President Vladimir Putin’s inner circle this week. But they had held off on removing Russia from the SWIFT network, even as fighting broke out in Kyiv.
Without SWIFT access, Russian banks would have no means of legally transacting with their foreign peers. The move will apply economic pressure on the country by cutting off its access to foreign exchange, impairing its ability to engage in trade.
Crypto a possible alternative for Russia
But doing so may push the country into adopting cryptocurrencies for overseas transactions. As it stands, regulators have no means of blocking transactions through non-centralized wallets.
European Central Bank President Christine Lagarde recently called for laws regulating crypto use in the bloc, citing the potential for Russia to use it in subverting sanctions. This comes amid growing speculation over Russia’s next move.
Crypto adoption has risen drastically in Russia over the past year. According to government data, Russian entities own roughly 12% of the world’s crypto holdings.
The government had last week proposed a bill to recognize and regulate digital assets, although it still opposed using crypto for transactions. Bans on crypto mining by hubs China and Kazakhstan has also seen miners tout Russia as the next big hub. The country’s abundant electricity supply and cold climate make it ideal for mining.
Still, the Russian central bank has widely opposed crypto adoption in the country. The lender had last month called for a blanket crypto ban, warning that the space was a large pyramid scheme that threatens financial stability.
In a more drastic scenario, Russia’s oil and gas dominance may see it leave western financial systems entirely. Former President Dmitry Medvedev said the country no longer needs diplomatic ties with the West, brushing off recent sanctions.