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Digital currencies could challenge SWIFT's dominance, says Central Bank of Russia official

An official of the Central Bank of Russia believes that the rise of digital currencies could render the SWIFT network obsolete.

Central Bank of Russia / Image by: Wikimedia Commons

Wed, 30 Dec 2020, 08:28 am UTC

While companies are now adding cryptocurrencies such as Bitcoin (BTC) in their portfolios as an inflationary hedge, the adoption of crypto for cross-border payments has been increasing as well. An official of the Central Bank of Russia (CBR) is now predicting that the rise of digital currencies, which include both privately issued cryptos and central bank digital currencies (CBDC), could make the international payments network SWIFT obsolete.

According to First Deputy Governor of the Central Bank of Russia Olga Skorobogatova, the development of digital currencies could challenge the SWIFT payment system, RT.com reported. Skorobogatova pointed out that over 30 financial regulators are currency in the process of developing their national digital currencies.

Given the current pace of development in the sector, the CBR deputy director estimates that several countries will be launching their own CBDCs 5 to 7 years from now. With the anticipated technological development that would link these national digital currencies for trading and settlements, they might even make the existing payment system, SWIFT, redundant.

“Then, we can deal with direct integration issues. In this case, SWIFT may not be necessary because it will be a different kind of technological interaction,” Skorobogatova said. “However, the global banking network may become one of the platforms for the new form of national currencies.”

But the CBR deputy governor noted that there are some hurdles to overcome before full integration of digital currencies on a global scale can be achieved, according to Bitcoin.com. One of these is that prior to launching a worldwide transaction network, “the security should be guaranteed fully in the technology behind cryptocurrencies.”

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a member-owned cooperative that facilitates cross-border payments and financial transactions for its members. As of 2019, the system has more than 11,000 member financial institutions across more than 200 countries worldwide with around 33.6 million transactions coursed through the platform daily.

RT reported that some Western politicians have threatened to bar Russian banks from SWIFT as part of sanctions. In response to the threat, Russia starting working on an alternative called SPFS.

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