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- SWIFT tightens oversight on crypto transactions.
- Russia and China explore crypto to dodge sanctions.
- Global crypto regulation is fragmented and evolving.
While cryptocurrencies are rapidly revolutionising financial systems, the Society for Worldwide Interbank Financial Telecommunications (SWIFT) is trying to prevent their misuse to circumvent sanctions by Russia and China.
At the London Digital Assets Summit on May 6, Tom Zschach, SWIFT’s Chief Innovation Officer, laid out how the company is enhancing its infrastructure to spot criminal crypto activity. The efforts are specifically aimed at stopping sanctioned countries from employing crypto solutions to circumvent Western sanctions introduced after Russia invaded Ukraine.
SWIFT presently assists banks with the Customer Security Programme (CSP) and Customer Security Controls Framework (CSCF). These facilitate banks to screen, control, and report doubtful crypto-based transactions. Though Zschach kept countries unnamed, he emphasized keeping global financial flows connected despite surging geopolitical tension.
“The risk of fragmented systems, what we call digital islands, is real,” declared Zschach. “However, SWIFT is indispensable for keeping the confidence and world integrated financially.”
Cryptocurrencies and the Shadow Economy
Media indicates that Russia utilizes Bitcoin, Ether, and stablecoins such as Tether (USDT) to evade sanctions in its Chinese and Indian oil trade worth about $192 billion. The cryptocurrencies facilitate near-immediate settlements as opposed to customary international bank wires, which require days.
Cryptocurrencies are also anonymous to some extent, which has raised issues of money laundering, cybercrime, and unregulated trading. The US Treasury has thus issued sanctions against various crypto exchanges and platforms believed to facilitate such activities.
Asia’s Evolving Crypto Ecosystem
While the US and UK tighten their crypto regulations, some Asian countries are adopting more relaxed approaches. Japan plans to reduce taxes on crypto gains, while South Korea may allow institutional trading soon. Singapore is also adjusting rules to welcome more global crypto players.
Still, it’s uncertain whether these new Asian exchanges might become alternative routes for sanction-bypassing transactions involving Russia and China.
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