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A quick breakdown of what SWIFT is and why it matters

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Re: A quick breakdown of what SWIFT is and why it matters

#291

Post by daniel-grigg »

periheli0n wrote: post #284
sealthedeal wrote: post #257

CEO and co-founder of Routefusion here, a cross-border bank to bank payment API. We use the SWIFT network regularly. I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone. I guess if I was super cool I would do an AMA because this is the only thread that is re…

What would keep some entity that has its SWIFT access revoked from switching to China's CIPS or even crypto? Would it be merely an inconvenience, requiring the change of a few processes, or would it create hard problems?

In the short term, both. Longer term yes, many countries would migrate to other systems which mitigates the value of SWIFT. Fear of that happening is part of the reluctance to use it as a political weapon.

Re: A quick breakdown of what SWIFT is and why it matters

#292

Post by rglover »

ChildOfChaos wrote: post #250

So bitcoin is going to go up? Asking for a friend.

It's very likely. It would be an effortless switch to Bitcoin for Russia and give them access to a currency/network completely invulnerable to nation state controls.

Blocking SWIFT for Russia would be a very, very, very stupid idea because it would precipitate the collapse of the U.S. Dollar. Which, I'd bet, is intentional because the central banks want to push out CBDCs they control and populations are primed to support it willfully (in opposition to Bitcoin) thanks to several years of anti-Russia propaganda. It's a perfect mousetrap.

All Russia has to do is tell European countries reliant on its energy exports that they'll only be accepting Bitcoin moving forward. This would force those countries to scramble to get Bitcoin (if they don't have it already), forcing the price up rapidly.

Re: A quick breakdown of what SWIFT is and why it matters

#293

Post by ta988 »

sealthedeal wrote: post #257

CEO and co-founder of Routefusion here, a cross-border bank to bank payment API. We use the SWIFT network regularly. I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone. I guess if I was super cool I would do an AMA because this is the only thread that is re…

You should do that AMA.

Re: A quick breakdown of what SWIFT is and why it matters

#294

Post by elliekelly »

periheli0n wrote: post #284
sealthedeal wrote: post #257

CEO and co-founder of Routefusion here, a cross-border bank to bank payment API. We use the SWIFT network regularly. I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone. I guess if I was super cool I would do an AMA because this is the only thread that is re…

What would keep some entity that has its SWIFT access revoked from switching to China's CIPS or even crypto? Would it be merely an inconvenience, requiring the change of a few processes, or would it create hard problems?

The two systems aren’t mutually exclusive. You can be a SWIFT member or participant and also use CIPS or cryptocurrency, though I think switching to crypto for payments would create a ton of procedural issues for most financial institutions.

Re: A quick breakdown of what SWIFT is and why it matters

#295

Post by agumonkey »

TekMol wrote: post #26

I often wonder how money is stored. It can't be just a number on a computer in a bank, right? Otherwise some Russian bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.". So I guess USD needs to be recognized by the US somehow? Could the US simply "void" all USD that are owned by Russia?

I know nothing but instead of one number, think transaction.

To fake money you need to forge transaction with input from somewhere, this can be checked.

Re: A quick breakdown of what SWIFT is and why it matters

#296

Post by lxgr »

JacobThreeThree wrote: post #277
sealthedeal wrote: post #257

CEO and co-founder of Routefusion here, a cross-border bank to bank payment API. We use the SWIFT network regularly. I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone. I guess if I was super cool I would do an AMA because this is the only thread that is re…

>I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone. How does the system guarantee that nobody's creating money without notifying everyone? Furthermore, does the system guarantee that the central banks of each country are correctly adjusting their books in…

> How does the system guarantee that nobody's creating money without notifying everyone?

Through a series of regulations regarding minimum liquidity/capital [1] and/or reserve [2] requirements.

> Furthermore, does the system guarantee that the central banks of each country are correctly adjusting their books in consequence?

By requiring them to periodically report on their assets and liabilities, checking for compliance with [1] and [2], and monitoring their reserve accounts.

[1] https://en.wikipedia.org/wiki/Basel_III

[2] https://en.wikipedia.org/wiki/Reserve_requirement

Re: A quick breakdown of what SWIFT is and why it matters

#297

Post by Slartie »

mohanmcgeek wrote: post #235
rosndo wrote: post #199

Earlier quoted context omitted.

> Indirectly, yes: They can force every bank holding USD balances for embargoed beneficiaries to freeze these assets. Failing to comply could, in the absolute worst case, lead to that bank's Fed accounts being frozen as well (which would take away its ability to settle in USD with other banks). They could also go much further. US has the power to force any bank that wants to transact in USD to freeze all Russian asse…

Isn't that what blocking them on SWIFT actually is? Or do they have another way?

No. Swift is "just" a messaging system. No money is transferred over it.

Blocking Swift access makes it very inconvenient for banks to perform international settlement, because banks today rely on automated Swift messages to coordinate such transfers. However, even before Swift, international transfers were possible: by phone or telex. The banks have to find other ways to communicate, which isn't easy in practice, but not impossible. The fact that Russia has its own Swift competitor, to which some international banks might switch over time, would probably help with that.

But by freezing bank accounts at the Fed, the actual settlements - the events at which money actually changes hands - could be prevented in the first place, no matter the way in which banks agreed over those settlements. Switching back to good old telex (or another financial communication network) wouldn't help in such a scenario. Banks would have to fall back to exchanging big suitcases of dollar bills, which obviously wouldn't practically work.

Because no bank would survive this, they would immediately cooperate when confronted with such a threat and freeze any Russian-held funds, even if those funds weren't actually held in USD in the first place and thus would theoretically be unaffected by the Fed account freeze.

Re: A quick breakdown of what SWIFT is and why it matters

#298

Post by yokaze »

pmontra wrote: post #45
can16358p wrote: post #27

Earlier quoted context omitted.

They do have physical cash reserves in central banks.

Which could be revoked by printing new money with a new design and giving them only to the friendly parties in replacement of the old ones. It's routinely done (Euro is on its second design) and old banknotes and coins are no more valid after some years (the first series of Euros doesn't have an end of life yet.)

Yes, the design is routinely changed to make the currencies more safe against falsification. And the old currency is often taken out of circulation simply by wear and tear. But it is the sign of a stable economy that legal tender does not have an expiration date.

"Note that it is U.S. government policy that all designs of Federal Reserve notes remain legal tender, or legally valid for payments, regardless of when they were issued. This policy includes all denominations of Federal Reserve notes, from 1914 to present as per 31 U.S.C. § 5103." https://www.uscurrency.gov/acceptance-and-use-older-design-f...

Despite not being legal tender anymore, the Deutsche Bundesbank changes your DM notes, if they are after issued after 1948 (https://www.bundesbank.de/en/tasks/cash-management/dm-bankno...). The currency has been introduced in 1948.

If you feel inclined to do so, you can spend a 1 Yen note from 1885 https://en.wikipedia.org/wiki/Banknotes_of_the_Japanese_yen

So, inflation and wear and tear takes old notes out of circulation rather than expiry.

Re: A quick breakdown of what SWIFT is and why it matters

#299

Post by mistrial9 »

_448 wrote: post #287
sealthedeal wrote: post #257

CEO and co-founder of Routefusion here, a cross-border bank to bank payment API. We use the SWIFT network regularly. I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone. I guess if I was super cool I would do an AMA because this is the only thread that is re…

How does one connect to the SWIFT network? Say, someone wants to start a company for providing some financial service like fund transfer across borders, then connecting to SWIFT will be very helpful. I was always fascinated by how all this works and what does it take to directly use the SWIFT network. Any insights on this will be really helpful.

help yourself to some legal accreditation in your actual jurisdiction, to start.

Re: A quick breakdown of what SWIFT is and why it matters

#300

Post by myko »

tadfisher wrote: post #105
infamouscow wrote: post #83

Earlier quoted context omitted.

The inescapable fact is Germany intentionally put themselves in a position to be more dependent on Russian oil/gas with their shutdown of nuclear power. The previous US president made a point about how Germany's decision contradicts the purpose of NATO.[1] 1: https://twitter.com/Cernovich/status/1496917092351692810

The decision doesn't contradict the _purpose_ of NATO, which is a fairly straightforward military alliance. It does impact the _effectiveness_ of NATO, because one of its member states is economically dependent on a non-member state with a high likelihood of conflict. Trump is saying that NATO shouldn't exist because of this intertwinement, and there's a sentiment going around that NATO caused the conflict by existin…

Interestingly, trump hated NATO and wanted to leave it. I firmly believe that his griping about issues like this, while accurate, was really a move to weaken the alliance and make the relationship between the US and European nations worse.

He even planned on withdrawing from NATO in his second term, had he won the election: https://www.independent.co.uk/news/world/americas/us-politic...

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