If oil and gas are one day denominated in cryptocurrency, we’re likely to see other industries start pegging their goods and services to crypto, opine Mark Lurie, Peter Dittus writing for Coindesk
Western powers have imposed unprecedented financial sanctions in response to Russia’s invasion of Ukraine, marking a seismic geopolitical shift that could drive many countries to adopt crypto.
In the modern era, international payments and national reserves have generally been viewed as state property and omitted from punitive sanctions when the US was not itself at war.
But what has happened in recent weeks has remade the landscape. By imposing unprecedented sanctions, freezing Russia’s foreign currency reserves and halting international payments from Russian banks, the US, EU and their allies have revealed a newfound willingness to weaponize the dollar-denominated global financial system and potentially leave the world’s smaller states out to dry.
To explain how, let’s first take a step back. The Belgium-based Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is the primary global messaging network for executing transactions between the world’s banks. The system is so effective that many countries also use it domestically, which is why SWIFT sees more than 42 million messages per day.
Any currency can be traded via SWIFT, but more than 40% of its deals are dollar-denominated, so it tends to reinforce the US dollar-based system. It should be no surprise, then, that in 2015, China launched a SWIFT competitor, the Cross-Border Interbank Payment System (CIPS), to boost international use of the yuan.