Arming SWIFT banking system could be the beginning of the end of US dollar as global reserve currency, experts warn | tech news

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The SWIFT banking system has been in the news for the past few days. Since the start of the war between Russia and Ukraine on February 24, SWIFT has become a hotly debated topic as the US and its allies have imposed economic sanctions on Russia to further isolate the country from the global financial community and force Moscow to stop its to withdraw troops from Ukraine.

SWIFT stands for The Society for Worldwide Interbank Financial Telecommunication and is a global financial messaging system founded in Belgium on May 3, 1973. It is a financial system that connects banks, financial institutions and governments around the world. The SWIFT financial network is used by banks to send secure messages about money transfers and other transactions.

Last week we wrote about SWIFT after Western leaders slammed Russia with a new set of sanctions, including freezing assets of Russia’s central bank and international reserves. Unfortunately, this isn’t the first time the United States has used SWIFT as a weapon against its enemies.

In 2018, former Treasury Secretary Steven Mnuchin also threatened China to use the nuclear economic option during a conference broadcast. Munchin said:

“If China does not comply with these sanctions, we will impose additional sanctions on them and prevent them from accessing the US and international dollar systems, and that makes a lot of sense.”

However, many experts said that arming the SWIFT banking system and the US dollar could force other countries to reduce their reliance on SWIFT and the US dollar by trading other currencies, potentially leading to the end of the US dollar as a global reserve could lead currency.

On October 12, 2018, Michael Maharrey, communications director for the Tenth Amendment Center, said that “the dominance of SWIFT and dollars gives the US great leverage over other countries.” Maharrey warned:

“The US government is showering “friends” with billions of dollars in foreign aid. On the other hand, “enemies” can be locked out of the global financial system that the US effectively controls with the dollar.”

Maharrey also warned:

“A number of countries, including China, Russia and Iran, have taken steps to limit their dependence on the dollar and have even worked to establish alternative payment systems. A growing number of central banks have been buying gold to diversify their holdings away from the greenback. It is no surprise that countries on shaky ground with the US are taking such action, but even traditional US allies have grown weary of America’s economic bullies.”

Maharrey isn’t the only one ringing the alarm bell. On Monday, some four days after the war with Ukraine began, JP Morgan CEO Dimon warned that disconnecting Russian banks from the SWIFT messaging system could have “unintended consequences,” including third parties finding ways to evade the fine.

According to a Bloomberg report on Friday, JPMorgan was one of the Wall Street firms that advised Washington against kicking Russia out of SWIFT. JPMorgan argued that excluding Russia from SWIFT could have far-reaching consequences that could harm the global economy and undermine the purpose of the penalties.

Meanwhile, on the same day, so did Wall Street giant Goldman Sachs warned:

“The overuse of dollar sanctions could force other actors to try to substitute dollar transactions, as Russia has done to some extent after previous sanctions.”

With sanctions crippling Russia’s economy in just a week, countries like Brazil, India, China and others may be looking for a second option and reducing their reliance on SIWFT and .US dollars for international trade. The outcome could also be devastating for the United States if Middle Eastern oil countries decide to stop accepting US dollars in exchange for their oil.

ColdFusion’s video below goes into more detail explaining the implications of the sanctions against Russia and the potential risks to the global economy in general.


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