Do sanctions work in a crypto world? The impact of the removal of Russian Banks from SWIFT on Remittances

Farid Makhlouf and Refk Selmi

Working Papers from HAL

Abstract: Russia's invasion of Ukraine triggered a surge of calls for Western allies to completely sever Russia from the global financial system by disconnecting it from the SWIFT payment system. The sanctioning of large Russian banks, coupled with their severance from the SWIFT, will make it hard for banks to receive payments or act as intermediaries. The present note seeks to assess the impacts of the removal of Russian Banks from SWIFT on international remittances to and from Russia. Our results suggest that the economic sanctions imposed on Russia exert an immediate adverse impact on remittances. In the longer-term, there is definitely a high risk posed for global repercussions from this war and resulting sanctions; it seems unlikely their impact will be contained to one country's borders, especially if there is a risk of high inflation and tightening of global financial conditions. With Moscow becoming growingly closed off to the financial world, it appears that Russians are becoming increasingly active in the cryptocurrency market. But with the traceable nature of the blockchain and lack of liquidity, it may be difficult for Russians to use cryptocurrency to evade the bevy of sanctions placed on the country.

Keywords: Remittances; War; SWIFT sanctions; Cryptocurrencies; Russia (search for similar items in EconPapers)
Date: 2022-03-06
New Economics Papers: this item is included in nep-cis, nep-pay and nep-tra
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