Following Russia’s attack on Ukraine last week, NATO allies have voted to apply sanctions that will prevent Russia from participating in the global SWIFT financial system. However, this could lead to the development of central bank digital currencies (CBDCs), such as the Digital Yuan developed by the United States’ economic adversary China.
The SWIFT, CHIPS, and Dollar, according to Bloomberg analyst Andy Mukherjee, are the primary pillars of the US economic dominance. As a result, weaponizing them against Russia will persuade China to establish a counter-force to American domination.
According to sources, China has already begun developing a viable replacement to CHIPS. Which is, known as the Clearing House Interbank Payments System.
China is developing its own system for cross-border interbank payments (CIPS).
China’s CIPS may settle claims in the Yuan while running on its own messaging network. That’s, similar to how America’s CHIPS resolves foreign payments in the USD. However, although CHIPs has a 40% global market share, CIPS only handles 3% of global transactions.
According to a Bloomberg expert, China can redefine its position in the global financial market with the Digital Yuan, also known as the e-CNY. The token is “technically ready” for cross-border use, according to China’s state bank, the PBoC.
After being excluded from SWIFT and CHIPS, China may easily persuade countries like Russia to utilize the e-CNY, according to the analyst. Traditional payment systems may be challenged by blockchain-based settlements using Digital Yuan.
Sanctions on Russia, according to John Hopkins economist Steve Hanke, could be harmful for the West. On Sunday, February 27, Hanke wrote in a tweet:
Of course, the United States’ economic dominance will not vanish overnight. Alternative payment systems, on the other hand, are gaining traction. Then, and may pose a threat to SWIFT and CHIPS in the next decade or two.
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