Russia’s central bank has decided to allow its domestic payment system to go international as many Russian banks have been disconnected from the SWIFT global payment mechanism following sanctions from the US and European Union.
Even as Russia had the second largest number of SWIFT users after the US, the Financial Message Transfer System of the Bank of Russia (SPFS) has been gaining acceptance with already about 399 users.
Bank of Russia Governor Elvira Nabiullina said that this payment system “will continue to operate smoothly.”
The payment system, which until now has been catering only to the domestic users, was developed by the Central Bank of Russia since 2014 after the US government threatened to disconnect Moscow from the SWIFT system.
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Belarus, which borders both Russia and Ukraine, has begun the process of disconnecting its own financial systems from the SWIFT network and connecting them instead to Russia’s System for Transfer of Financial Messages (SPFS) alternative.
Since 2019 many agreements have also been reached to link SPFS to other countries payment systems in China, India, Iran, as well as the countries within the Eurasian Economic Union (EAEU) which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan.
“The only problem is that amid the current situation it may not be possible for Russia to expand the footprint of the payment system in a very aggressive way,” an analyst said.
According to Russia Briefing, plans were afoot to integrate the SPFS network with China’s homegrown payment system Cross-Border Interbank Payment System or CIPS, which Beijing may now aggressively push on the global stage.
Meanwhile, the South China Morning Post in a report said that Dongguan Securities analysts Chen Weiguang, Luo Weibin and Liu Menglin have underlined the need to reduce dependence on the SWIFT system. “As seen from Russia’s Swift exclusion and the China-US trade friction in recent years, it is necessary to reduce reliance on Swift to ensure financial security,” they wrote, according to the news organization.