BRICS alternative to SWIFT is possible only if global banks adopt the system

The BRICS member states have officially announced the creation of their financial system similar to the SWIFT international financial messaging system. The move could be a turning point in the global financial architecture, offering an alternative to the dominant Western financial instruments.

The initiative to establish their financial messaging system among the BRICS countries is not new. Earlier, Mohsen Karimi, deputy head of Iran's Central Bank for International Affairs, noted that the organisation plans to consider the issue at the highest level. In March, Russian Presidential Assistant Yury Ushakov announced the start of work on a payment system based on blockchain and digital technologies.

POTENTIAL TO COMPETE WITH SWIFT

Economic expert Iskender Sharsheev believes the new system's success will depend on its speed, security and reliability.

‘To compete with SWIFT, the new platform must ensure global coverage, resistance to cyberattacks and stable functioning in any conditions,’ he emphasised.

In his words, the adoption of the system by global banks and financial institutions will be key to its success. Many countries and corporations depend on SWIFT for international settlements, so switching to an alternative will require both economic incentives and the political will of the BRICS nations.

SETTLEMENT IN NATIONAL CURRENCIES AND THE IMPACT ON THE DOLLAR

The issue of national currencies' use in the new system is particularly interesting.

‘If the platform favours settlements in the national currencies of member countries, it could reduce the dollar's dominance in international trade, especially within BRICS,’ Iskender Sharsheev believes.

However, this requires building confidence in national currencies and ensuring the stability of their exchange rates.

"Countries should develop derivatives markets to hedge currency risks. China and Russia have some progress in this direction, but political and economic risks remain,’ the expert noted.

The creation of an alternative to SWIFT has a political component. The transition to national currencies and financial systems can be perceived as a challenge to the existing finance order, dominated by Western countries.

"The main advantage of such a system is diversification and reduced dependence on Western financial instruments. This is especially relevant against the background of geopolitical tensions and sanctions risks,’ the economist believes.