What are the alternatives to SWIFT, and how are they faring? Explained

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Multiple wars and U.S. weaponisation of the dollar through financial sanctions are making countries in the Global South think of bypassing the so-far universally accepted SWIFT system for inter-country payments. | Photo Credit: Reuters

The story so far: The New Delhi Declaration that came out of the recent BRICS Summit in the national capital resolved to increase trade between member-countries and payments in national currencies. Days before the summit, a report by the news agency Reuters quoted sources as saying that at the event, India would push to link central bank digital currencies (CBDCs) for cross-border payments across BRICS nations, despite political and technical hurdles that could limit progress. The proposal to link CBDCs would be part of the agenda for the leaders’ meeting, the sources said, though the limited adoption of digital currencies globally could complicate implementation, the report added. The proposal was, however, not part of the Declaration.

On the summit eve, Russia’s largest bank Sberbank said it saw major ‌opportunities for India-Russia bilateral trade settlements through CBDCs. At a media briefing in New Delhi, Sberbank chief executive officer Herman Gref said trade settlement in CBDCs was much ‌more efficient.

Multiple wars and U.S. weaponisation of the dollar through financial sanctions are making countries in the Global South think of bypassing the so-far universally accepted SWIFT system for inter-country payments . The attempts to do so have been patchy, but there is an increasingly felt need to have other options. Even on Thursday, the U.S. Senate empowered President Donald Trump to impose 100% tariffs on countries such as India and China that buy Russian oil or gas.

Project mBridge is a group comprising the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China, the Hong Kong Monetary Authority, and the Saudi Central Bank.

The Cross-Border Interbank Payment System (CIPS), a Reuters report said, is backed by the People’s Bank of China. China launched the CIPS clearing and settlement services system in 2015 to internationalise yuan use. It allows global banks to clear cross-border yuan transactions directly onshore, instead of through clearing banks in offshore yuan hubs, the report said.

The System for Transfer of Financial Messages, or SPFS, was developed by Russia in 2014 to bypass Western sanctions. In 2022, Russian banks were cut off from SWIFT, and the SPFS was of help.

SEPAMA, Iran’s local interbank telecom system, has as many as 52 branches of Iranian banks and four unnamed foreign banks connect ing with 106 banks using the SPFS, the Central Bank of Iran said in 2023.

The Bank for International Settlements (BIS), an international financial institution owned by central banks to foster international monetary and financial cooperation, exited Project mBridge on October 31, 2024, after hand-holding it since 2019, when the Hong Kong Monetary Authority and the Bank of Thailand launched the system.