The White House, along with the European Commission, Canada, the United Kingdom, Germany and Italy, announced late Saturday night that they would expel certain Russian banks from the SWIFT payment system.

in a joint declarationthe parties wrote that:

“This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.” While he also promised the […] “restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in a way that undermines the impact of our sanctions.”

Going one step further, Ursula von der Leyen, current President of the European Commission, revealed what:

“…we will work to ban Russian oligarchs from using their financial assets in our markets. Putin embarked on a path with the aim of destroying Ukraine. But what he is also doing, in fact, is destroying the future of his own country.”

Let’s unpack.

Russia’s expulsion from SWIFT

SWIFT is by far the largest financial messaging system used by more than 11,000 institutions around the world.

Following Russia invasion of Ukraine, the EU and its partners began to issue sanctions against the country, its president, Vladimir Putin, and certain political representatives.

Russia’s exclusion from SWIFT is intended to eliminate the country’s ability to liquidate assets and transfer funds between institutions that are members of the system. The move is made in an attempt to isolate and punish the country.

In essence, without SWIFT, banks and their customers would find it much more difficult, if possible, to operate on a global scale.

What else is there?

There are many reports suggesting that Russia has been working on an alternative to SWIFT for quite some time.

The present day, Asian markets reported that there is already an alternative to which Russia can turn: CIPS. Short for Cross-Border Interbank Payments System, this is China’s international payment solution and was first revealed in 2015.

The report also highlights that there are at least 23 Russian banks that are already connected to CIPS.

However, China hasn’t exactly been very decisive in its actions during the conflict, which is hard to fathom. On the one hand, the country presented itself as a protector of sovereign independence, but on the other, it is reluctant to denounce Russia’s actions.

get into crypto

What does all this mean for cryptocurrencies? Well, this is also difficult to determine or predict.

Price discussions and speculation aside, I am of the opinion that if Russia decided to turn to cryptocurrencies as an alternative payment network, it would put enormous pressure on regulators in Western countries.

We see many legislative frameworks in developed countries where cryptocurrencies come under massive scrutiny. The past year is a vivid example of this, as major cryptocurrency exchanges scrambled to verify their trading volume with the aim of avoiding harsh penalties or becoming outright outlaws.

The position of the West on the current conflict in Ukraine is quite clear: they are doing everything they can to cut off Russia’s financial arms from the rest of the developed world and even instituting personal sanctions. If Russia turns to crypto, I think it’s pretty clear that the regulatory climate will get tougher.

But that’s not necessarily bad news. In fact, many crypto advocates have long pushed for clear regulations. In our podcast with BitMEX CEO Alex Hoeptner saying he thinks regulators are likely to first put cryptocurrencies in the same regulatory basket as traditional assets, which he thinks is wrong. He also believes that rules are needed for the industry to move forward.

But it’s not necessarily good news either. It is also important to consider a scenario in which the West condemns cryptocurrencies as a pro-Russian tool to circumvent sanctions.

As I mentioned at the beginning, it is frankly impossible to determine (at least for me) the possible outcomes, but I suppose one thing is certain: a lot of uncertainty awaits us.