Zhou Xiaochuan, former head of the People’s Bank of China, said that the International Financial Transaction System, known as SWIFT, is not irreplaceable, but its replacement will require serious preparation, given the efficiency and scale of SWIFT.
He stated that cross-border payments in global trade could theoretically be made without using SWIFT. If SWIFT were to be widely used as a sanctions tool, surely other messaging channels would be found to continue trade.
Global financial payment systems or messaging systems, if they roll back to some Cold War patterns, will hurt everyone.
The China Interbank Payment System (CIPS) is designed for cross-border payments involving the RMB. Of course, it can also be used in some other major currencies, but so far few of them use CIPS.
Last year, the number of transactions processed by CIPS exceeded 3.3 million, an increase of more than 50% over the previous year. In 2021, CIPS processed about 12.56 trillion transactions, 75% more than in 2020. The number of CIPS participants has reached 1,259, and the system covers103 countries and regions. There are 649 foreign institutions participating in the system.
Since using SWIFT as a weapon could block capital flows from different countries, it is prudent to look for an alternative that would also promote more equitable use of SWIFT in the future.
Zhou Xiaochuan added that the digital yuan is not intended to replace the U.S. dollar, and it “cannot easily be used as a military weapon.