SWIFT, the financial network that helps process bank-to-bank transfers denominated in US dollars is apparently the military branch of the US Treasury Department. That is, at least according to Ari Paul, chief information officer of BlockTower Capital, a cryptocurrency investment and trading firm. But what exactly does he mean by that, and is there any truth to it? In this article, will be digging into that assertion and see what Paul’s claim is all about.
In the last few years, financial inclusion has been a popular buzzword of sorts. Basically speaking, the idea behind financial inclusion is that steps should be made so that everyone, no matter where they live, can get access to banking services. One example of this is the Ethereum project OmiseGO which aims to in part focus on financial inclusion activities in places like Southeast Asia.
Read also: Beginners Guide to OmiseGO
But what is this about financial exclusion? Simply put, it means when a government or bank takes steps to financially isolate a country or group of people.
Think of it this way. In order to get US bank account, you will most likely need to have, at the very least, an address and some form of ID. In some areas, the requirements could be even higher. One could argue that this is a form of financial exclusion, because the banks are limiting who can get bank accounts, even if the entry requirements may seem low. Others will argue that allowing anyone to create a bank account with no requirements for identification would be a guaranteed recipe for money laundering or fraud.
SWIFT versus the world
So what does all this have to do with SWIFT? For starters, what is SWIFT?
SWIFT is a legacy system that is designed to move US dollars between banks. The system is highly international, and most major banks around the world have access to it. This is because a large amount of global trade is denominated in US dollars, and the dollar is also the reserve currency of many different nations. It could be argued that access to the SWIFT system is a necessary component to participate in global commerce.
According to Paul, the US government has used the SWIFT system as a means of exerting pressure on different groups.
His first example of this is that back in the early 2000s, the system was used to collect data on various European users of the system.
1/ It seems to be a mix of soft and hard power. The US worked with SWIFT to get transaction data on European citizens from 2001-2006. When this became publicized, the US switched to hacking and message interception: https://t.co/V4XEDGD6VL
— Ari Paul ⛓️ (@AriDavidPaul) June 27, 2018
According to the article Paul cited, the system is a frequent target of the NSA for monitoring, and it collects massive amounts of data on financial movements globally. The system is apparently so well controlled by the US that it could be used to intercept and seize assets as they move in between foreign countries.
That’s not all. Restricting access to the system can also be a form of economic attack, since it can in many ways restrict access to the global financial system. Paul cites two places in particular, North Korea and Iran, arguably some of the most isolated countries in the world. If the US government were to allow these two countries to gain access to the SWIFT system, then they would no longer be financially excluded, for better or worse.
2/ By the US' control over SWIFT, the US can economically isolate countries like Iran and North Korea. This is a leading reason why a totally obsolete and wasteful system persists. If countries of the world created a new system from scratch, the US wouldn't have such control.
— Ari Paul ⛓️ (@AriDavidPaul) June 27, 2018
This is Why We Need Crypto
One of the biggest issues with centralized systems that require permission in order to join is that financial exclusion becomes inevitable. Whomever is in charge of the system and of granting access will undoubtedly come to the table with their own biases and agendas that they will want to push in any way possible. Giving a single country (i.e. the US) total control over one of the most important, albeit nearly obsolete, financial transaction systems is dangerous.
One could argue that so far, the US has primarily acted in the best interests of the global community. That still does not mean they should be given total ownership over something like it. The US government itself is designed so that it’s leader does not have absolute power for a good reason.
This is where decentralized finance systems need to step in. As we all know, cryptocurrencies suffer from none of these issues as they are permissionless and require no authority to intentionally include people, and moreso lack an authority to specifically target or exclude people.