SWIFT, Financial Censorship, The Bitcoin Standard (I)

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Coinmonks

8 min readMar 1, 2022

From Russian war sanctions to the Canadian government freezing the donations designated to fund the blockages in Ottawa, people are experiencing a new wave of financial cancellation. Capital is politically neutral but how it is used or allocated may not be so.

Being forcefully removed from tools essential for global, local, and even peer-to-peer trades is an alarming issue beyond ideological disagreements — regardless of whether you’re pro-Russia or pro-Ukraine. Subjective value judgements should not be justified for terminating individuals’ basic right to transact.

Cryptos are widely considered as censorship-resistant, but crypto exchanges aren’t. Six major crypto exchanges are requested by Ukraine to shut down the spot markets that pair ruble to cryptocurrencies. The government also asks the exchanges to block all Russian customers, for thwarting any forms of ruble fiats getaway and thus enforcing the sanctions imposed by the West.

Coinbase agrees to ban individuals and entities listed as sanctioned subjects, but refuses to extend the ban to ordinary Russian civilians, and states their mission to continually “increase economic freedom.”

However, what if the US legally requires the exchanges to comply to the request? As Kraken CEO Jesse Powell has tweeted previously on the Canadian government freezing accounts linked to ‘Freedom Convoy’ trucker protests, he said that exchanges are “forced to comply to” shut down related accounts and thus recommended concerned users to move their assets off the exchange.

Perhaps, it’s time to reflect upon the weaponization of money used as a vehicle of punishment for achieving political goals.

SWIFT as a Hegemonic Power

The West bans selective banks in Russia from accessing the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment network, the messaging network underpinning global financial transactions. SWIFT coordinates more than 11,000 major banks and financial institutions around the world for cross-border transfers.

This is an extremely powerful punishment.

Iran’s s economy has been severely wounded, remaining vulnerable, since the country got kicked out of SWIFT in 2012. Reportedly, Russia’s GDP could shrink up to 5% if Russia is completely cut off from the SWIFT network. Russia deserves the harsh punishment for its military aggression, some claimed, and thus no mercy should be bestowed to those bearing the retaliation.

Ordinary Russians, the majority of whom may despise the war no less than westerners do, are now facing domestic turmoils like nationwide bank runs and the destabilized ruble crashing to the all-time low. Protestors bravely chanting anti-war slogans on the streets of Moscow and St.Petersburg have also fallen prey to this sweeping ban, with some facing years-long jail time.

This is not a moral tragedy, but a financial one.

Yet, the doomday will be even worse than what it is now, with rising prices, falling incomes and investments, the accelerating loss of human capital due to emigration, and a further escalation of warfares.

Russian ruble has devalued more than 20% against USD

French Finance Minister Bruno Le Maire referred to the SWIFT ban as a “financial nuclear weapon”, with an impact potentially even more far-reaching than what a nuclear bomb could do.

However, we rarely frame the SWIFT expulsion as an act of cruelty or even barbarism resulting in widespread poverty, as civilians are basically cut off from international transactions. The hegemonic power of SWIFT equipping the West with overwhelming domination is an all-encompassing financial dictatorship haunting any dissented powers against the western sphere of influence.

No countries, regardless of political righteousness or shrew pragmatism, should be given or possess such an unrestrained power nearly exterminating the economy of another country. If the world is worried about the abuse of nuclear power, why wouldn’t it be equally concerned about the omnipotence of this financial nuclear weapon?

Whether it is SWIFT, or an equivalently powerful network later developed and adopted by China and Russia, there is a fundamental problem with the governmental control on digital payments. The right to transact freely should not be subject to ideological differences, nor financial censorship.

Freedom to Transact as a Constitutional Right

A pseudonymous account, Punk 6529, with more than 277K followers on Twitter, argued through a 56-tweets-long thread why the freedom to transact should be treated as a constitutional right no different from the freedom of speech, assembly, and religion. The thread was written in response to the Trudeau government invoking the Emergency Act to seize all the funds, some in the form of cryptocurrencies, donated to the truck drivers committing blockades in Ottawa.

This time it is the Liberals who freezed the accounts but next time it could be the Conservatives or Social Democrats who does the same out of the same purpose — banning transactions they consider as illegal for reasons we may never get to know…

For combating money laundering and impeding fund transfers implicated with terrorist activities, government-oriented infringements upon the right to transact have been conditioned as an irrefutable form of political correctness: We accept and tolerate how governments record our payment history and specify to what ends transactions are allowed to go through.

“There are no other constitutional rights in substance without freedom to transact.” said Punk 6529. People who can’t afford computer equipments or the Internet access, he added, are, in fact, deterred from practicing the freedom of speech. Someone banned from opening a bank account is likely to have trouble getting a shelter and having health insurance — which may be considered as a basic human right in many western countries. To be able to digitally transact, in the current epoch, could be equivalent to a necessity of surviving in a city.

Also, privacy and freedom to transact are intrinsic to each other. Think about that: If there is a third party recording and censoring online peer-to-peer conversations, can we still claim the freedom of speech remains intact? The freedom to transact depends on the absence of third parties such as governments and banks which monitor closely how money is moved in between accounts.

The issue goes much beyond the ideological clash exemplified in the Russian invasion of Ukraine. The expansion of governmental power — authorized by laws to track, deter, and terminate transactions — began as early as when digital payments came alive, replacing cash as the dominant medium of exchange.

Financial Censorship

The progressive development of digital banking encapsulates the becoming of financial censorship. The history of digital adoption that renders bank transfers as the predominant method of payments, replacing the universality of cash, is also a history of weaponizing modern banking to encroach upon the right to conduct transactions.

For thousands of years, as argued by Punk 6529, we have transacted with each other without being restricted to the requirements normalized by financial institutions. “Know Your Customers” and “ Being Custodial” are mandatory nowadays for banks to maintain operations anywhere. Digital payments have greatly facilitated transactional efficiency, however, with the imposed cost of sacrificing customers’ privacy.

If we have problems with Big Techs inappropriately collecting and misusing personal data, why wouldn’t us also question the legitimacy of financial institutions demanding all the private information? That Google makes huge profits by selling our data to advertising agency, but banks collect our data simply for complying to relevant laws, makes people yield abidingly towards the seemingly good causes.

Banks get to know the identities about the recipient and sender of a bank transfer; for the involved amount beyond a certain threshold, a sender is required to tell them the reason behind the wiring. Since when — do we find it acceptable to extend governmental oversights to such an extent?

Digitized banking paves the path for the weaponization of financial institutions. If recent history teaches us anything, it is that financial intermediaries cannot be relied upon to stand with the minorities or unpopular voices.

CBDCs as the Endgame

Central Bank Digital Currencies (CBDCs) will be the next soon-to-be-adopted lethal weapon for governments to track transactions and restrict specific individuals from conducting payments. In a world where cash is banned or with little utility, purchase habit and payments history will be documented, collected, and analyzed by a third party we have no clue of its extended authority. CBDCs are an epitome of power centralization, depriving the privacy of individuals and granting a state with greater power to oversee its citizens.

Then how can we be sure of the ruling parties not using the technology to suppress dissidents? The unchecked power of governments may lead to unprecedented consequences to democracies as a whole.

Despite ideological differences, governments are likely to introduce CBDCs out of these three universal appeals:

All transactions conducted via CBDCs are recorded, tracked, and overseen by the governments, so corruption, money laundering, and other forms of illegal activities can be greatly deterred.
Tax evasion is effectively tackled.
Cash is killed, so is the anonymity of payments.

Some may argue, if you have done nothing wrong, innocent as you have always been, why would you be worried about CBDCs and measures targeted at illegal means of transactions?

People worried about public surveillance or the credit score system implemented in China tend to view a limited-power government for the better interest of its people. They’re largely considered as libertarians who prioritize a small government over a big government with overarching power over its citizens.

Yes, this, at the end, is a difference of opinions, but the conception of the Bitcoin Standard could be an alternative for both sides to ponder over.

We will talk more about it in the next article.

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SWIFT, Financial Censorship, The Bitcoin Standard (I)

SWIFT as a Hegemonic Power

Freedom to Transact as a Constitutional Right

Financial Censorship

CBDCs as the Endgame

Also, Read

Written by Jay Zhuang