- Swift will increase surveillance of crypto transactions.
- Russia and China search for codes to dodge sanctions.
- Global crypto regulations are fragmented and evolved.
Cryptocurrencies are rapidly revolutionizing the financial system, but Interbank Communications Associations (SWIFTs) around the world are trying to prevent misuse to avoid sanctions by Russia and China.
At the London Digital Assets Summit on May 6th, Swift’s top innovation officer Tom Zschach explained how the company strengthens its infrastructure and finds criminal crypto activity. The effort specifically aims to stop authorized countries from adopting crypto solutions to avoid Western sanctions introduced after Russia invaded Ukraine.
Swift currently supports banks with its Customer Security Program (CSP) and Customer Security Control Framework (CSCF). These encourage banks to screen, control and report suspicious crypto-based transactions. Zschach had kept the country unnamed, but emphasized that it would connect global financial flows despite the surge in geopolitical tensions.
“The risks of fragmented systems known as the Digital Islands are real,” declared Zschach. “But Swift is essential for financial integration of confidence and the world.”
Cryptocurrency and the shadow economy
Media shows Russia will use stubcoins such as Bitcoin, Ether and Tether (USDT) to avoid sanctions on the Chinese and Indian oil trade worth around $192 billion. Cryptocurrencies promote near-disabled settlements, as opposed to the conventional international banking line that requires several days.
Cryptocurrencies were also somewhat anonymous, raising issues of money laundering, cybercrime and unregulated trading. Thus, the US Treasury has issued sanctions against various crypto exchanges and platforms that are thought to promote such activities.
The evolving cryptoecosystem of Asia
The US and the UK are tightening their crypto regulations, while some Asian countries have adopted a more relaxed approach. Japan plans to cut taxes on cryptocurrency profits, but South Korea may soon allow institutional transactions. Singapore is also adjusting rules to welcome more global crypto players.
Still, it is unclear whether these new Asian exchanges could become alternative routes for transactions that bypass sanctions involving Russia and China.