The SWIFT War
SWIFT = Society for Worldwide Interbank Financial Telecommunication. This is the new political battle ground which sits above the skirmish on the physical soil.
The Russian invasion of Ukraine has so many implications for all of us. At Balance, we have been collaborating with people in Ukraine, Belarus & Russia. All of them and their close families are currently safe—but it was very scary.
We are now in the fog of war. I have no idea what is going to happen. However, I want to highlight one thing that keeps coming up in the news:
Society for Worldwide Interbank Financial Telecommunication
The video above has some really fantastic points that I want to highlight for you here:
The most chilling term that emerged from this video for me was this:
“Iran was De-SWIFT-ed”
This is the very definition of being de-platformed. SWIFT is not a credibly neutral system that developers can build upon. It is a permissioned bank-to-bank channel that routes through the regulated financial system.
This system is now being discussed a lot in the news:
Why didn’t the U.S. cut off Russia from SWIFT? It’s complicated.
If Russia was kicked off SWIFT, the nation would essentially be severed from much of the global financial system.
But doing so would not be simple and could come with its own set of costly complications for countries outside Russia, many of which are dependent on the country for energy, wheat and other commodities. That has made some nations skittish about pulling the trigger.
nytimes.com/2022/02/24/business/russia-swift-financial-system.html
This piece from the New York Times covers the trade-offs around trade flows. It is not about cutting Russia off from the world. It is all about what happens when you cut the rest of the world off from Russia. Europe is addicted to Russian gas and oil. A financial blockade would turn off the pipes.
Emily Kilcrease, a senior fellow at the Center for a New American Security, argued that such an action could accelerate Russia’s efforts to expand the use of its own financial messaging service and drive it closer to China.
“There’s also this longer term question about whether de-SWIFTing in and of itself is just creating a lot of bad incentives for Russia,” Ms. Kilcrease said.
Will crypto replace SWIFT?
Not immediately, but gradually. Not totally, but increasingly.
The world’s commodity markets are not going to flick on crypto-denominated oil barrels overnight. It will take years—but it will happen. This video explains some of the reasons why it cannot happen today:
The important point here is this: SWIFT is a chokepoint. Dictators do not like being choked. Exploring truly credibly neutral financial systems like Ethereum is going to get a lot more political.
The United States can control SWIFT. It cannot control Ethereum.
Refugees & Seed Phrases
People Balance has supported are fleeing their home countries with seed phrases which give them access to their Ether. They are going to use these funds to set up a new life for the time being.
I strongly believe that these tools have been instrumental in helping people to feel comfortable moving across the world. Paying people with Belarusian or Ukrainian bank accounts is phenomenally difficult. Paying with Ethereum is simple.
SWIFT Balances & Swift Balance
Balance is written in Swift, a programming language from Apple. There is a fascinating set of parallels to draw here:
SWIFT : Access to Closed Source Finance
Swift : Access to Open Source Finance
Over time, more people are going to start truly valuing the ability to custody their own capital. Banks are incredibly useful when times are good and regulators are reasonable. However, that is not often the case any more. Even Canada cannot resist the temptation to taint their protesting citizens.
How you can help right now
I have made a few donations through EnDAOment, an organisation I trust.
You can donate here: app.endaoment.org/ukraine
Thank you for reading my scattered thoughts. I am doing my best to process this new reality.
ric.eth
Any info on Chainlink and it’s relationship to SWIFT?