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SWIFT is a messaging system, the US (and everybody else) can inspect SWIFT transactions to see what's going on . But as far as actual enforcement, once the US s

SWIFT is a messaging system, the US (and everybody else) can inspect SWIFT transactions to see what's going on . But as far as actual enforcement, once the US sees something they really don't like in the SWIFT messaging platform they can only prevent the target bank that operated the transaction from accessing USD by cutting off that bank US branch from ACH/Fedwire, or if the bank doesn't have a branch by forcing the Correspondent US bank to drop their bank client. Theoretically if the EU wanted to trade with Iran or if China wanted to sell gas to China...they can do it The US will notice it and would block that bank access to USD and close that bank US branch if they have any.. but they can subsequently continue in RUB, EUR, CNY.. For a bank losing the ability to loan to US customers or do retail business in the US is not a big deal....the very huge problem is that you won't be able to access the US bond markets and the US equity markets. The ability to buy and sell the world's best debt: the mighty US treasuries goes away. No bank survives that. SWIFT is not special, it just saves time to the FBI and the NSA...but if SWIFT were to lose its relevance due to Central Banks Digital Currencies, then the US will still know that you violated sanctions and you'd still be immediately blacklisted and sanctioned yourself Digital currencies such as the digital yuan or the digital euro will have 6-12 months of free reign before those same countries which make up SWIFT come together again to agree on the same principles behind SWIFT (the ability to inspect etc). The Central bank of an other country can be too big to sanction (opposed to a commercial bank) but the new framework will require that the identity of those who made the transaction are targeted. So with the new Central Bank Digital Currency regime the sanction and blacklist doesn't hit the whole commercial bank (because the transaction won't be facilitated by the commercial bank but by a Central Bank) but directly the person or the company violating the US sanctions. In the end the ability that the US has to sanction and be the world police comes from the strenght of the US economy and the might of the US military as well as the power of US intelligence. The balance of power with regards to that hasn't changed

fmajid 5y ago
The EU (more precisely France-UK-Germany, parties to the Iran nuclear deal) tried to set up a payment system to keep the deal alive, but European banks and companies like Airbus declined to participate because of the threat of US sanctions. Chinese banks are much less likely to view such sanctions as an existential risk, and many are already under sanctions anyway. The centrality of the US also stems from its connectivity. There used to be a time when intra-European Internet traffic would be routed through the US, even though the EU economy was larger than the US’ pre Brexit.
- ObserverNeutral 5y ago
  Chinese banks are even more thirsty for US Treasuries. They can't risk being denied access to USD because that's how the only way you have to buy Treasuries and receive interest and principal back if you are already invested (they all are)

fmajid 5y ago

The EU (more precisely France-UK-Germany, parties to the Iran nuclear deal) tried to set up a payment system to keep the deal alive, but European banks and companies like Airbus declined to participate because of the threat of US sanctions. Chinese banks are much less likely to view such sanctions as an existential risk, and many are already under sanctions anyway. The centrality of the US also stems from its connectivity. There used to be a time when intra-European Internet traffic would be routed through the US, even though the EU economy was larger than the US’ pre Brexit.

ObserverNeutral 5y ago
Chinese banks are even more thirsty for US Treasuries. They can't risk being denied access to USD because that's how the only way you have to buy Treasuries and receive interest and principal back if you are already invested (they all are)