Russia Develops Blockchain Payments System to Replace Swift Amid Tough Sanctions
- Russia has built a blockchain-based payments infrastructure meant to maintain its international trades following stiff sanctions from the West.
Russia has come up with a blockchain-based international payment system as a substitute for the SWIFT international payment system. Other than fiat transactions, the platform would also enable payments in and storage of cryptocurrencies.
In light of its offensive launch on Ukraine, Russia has received several sanctions from countries disapproving of its actions. In February, Western nations excluded Russian banks from the Belgium-based SWIFT messaging system. Even since Moscow has sought replacements for the same to enable its semi-halted foreign trade.
Russia Creates New Blockchain-Based Payments Platform
In its latest announcement, government-owned Rostec Group said it now had a new unsanctioned digital payments infrastructure. The Novosibirsk Institute of Software Systems (NIPS), an affiliate of Rostec, came up with the blockchain (CELLS) on which the international payments platform is built. The project, Rostec says, utilizes distributed ledger technology for integrations.
The system will enable Russia to pay for its imports in its native currency, the Ruble, rather than the US dollar. On the other hand, Russia will receive payments for its exports in the native currency of the countries it trades with. Rostec now plans on introducing foreign governments, companies, banks, and other financial institutions to the payments platform. The organization is confident in the new project, saying it could become “a real alternative” to SWIFT’s international payments services.
Other than enabling payments, the CELLS blockchain also allows users to open crypto storage wallets. Oleg Yevtushenko, head of the Rostec Group, assured that the payment system enables “high speed and secure transactions.” The platform currently handles up to 100,000 transactions per second (TPS), and Yevtushenko says it could double this amount. In comparison, the Solana blockchain supports 50,000 TPS practically, and over 700,000 TPS theoretically.
Uncertainties About Cryptocurrencies
At some point, Russia leaned towards using cryptocurrencies to skirt around the tough sanctions imposed on it. A challenge in this has been that crypto exchanges have increasingly faced pressure to cut off Russians from their services and follow the moral compass set by other sanctioning entities. In April, Binance prohibited withdrawals and transactions from Russian accounts with balances of over $10,000. Meanwhile, the likes of Coinbase, Kraken, and KuCoin said they would only freeze Russian accounts on legal grounds.
But even then, Russia itself has been on a back and forth regarding the adoption of cryptocurrencies for payments. The Russian Central Bank (RCB) says cryptocurrencies carry great financial risk and undermine the country’s monetary policy. The bank even proposed a ban on all cryptocurrencies in January.
In contrast, just a few days ago, the Russian government said it was considering crypto for international payments. Its latest move shows a need to encourage foreign investment, and domestic trade, even if it means crypto legalization.