Nine Asian central banks to adopt SWIFT alternative

Saturday, 3 June 2023 00:26 - - {{hitsCtrl.values.hits}}

ACU member states set to launch Iranian-developed system within next few weeks

The members of the Asian Clearing Union (ACU) agreed during a recent summit in Iran to launch a new cross-border financial messaging system in June to rival the SWIFT international payment network.

ACU members include the central banks of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka, Myanmar, and Iran – although the latter is isolated due to western economic sanctions.

“The [ACU] countries decided to have a customised system for themselves, considering that SWIFT is not available to all countries and given that it has its own costs,” CBI Deputy Governor Mohsen Karimi said on 24 May in comments carried by state-run Fars News Agency.

The Central Bank of Iran (CBI) reportedly developed the new, unnamed system for banking communication among ACU members.

Apart from the top officials of the ACU member states, the Governor of the Russian Central Bank took part in the summit as an observer, along with officials from Belarus and Afghanistan.

Belarus and Mauritius applied for ACU membership last week.

CBI Governor Mohammad Reza Farzin revealed that the bloc will seek to admit new members and diversify the currencies it accepts for payment to help with a broader de-dollarisation campaign.

Farzin reassured attendees that dropping the dollar would protect member states’ foreign exchange reserves while enabling effective settlement of bilateral trade deals.

“De-dollarisation is not a voluntary choice by countries anymore; it is an inevitable response to the ‘weaponisation’ of the dollar,” Iran’s first Vice President Mohammad Mokhber said at the meeting.

The senior official noted that, over the past decade, the “weaponisation” of the greenback pushed sovereign nations to find alternatives to mitigate the potential impact of possible future sanctions.

Iran has been ramping up its de-dollarisation efforts by phasing out the dollar in bilateral trade agreements with Russia. Earlier this month, Iranian President Ebrahim Raisi called on the CBI to ditch the dollar in trade and use national currencies instead.

Iran this year also applied to join the BRICS economic bloc. This organisation is expected to announce a new currency for its member states at an upcoming summit in South Africa.

Earlier this year, the Islamic Republic linked its banking system with Russia’s, as the two nations are cooperating to overcome unilateral sanctions imposed by the west.

Russian Deputy Prime Minister Alexander Novak said during a visit to Tehran last month that 80% of Russian-Iranian trade was now being conducted in their national currencies.

Despite Washington’s “maximum pressure” sanctions regime, Iran continues to trade with around 150 countries worldwide, with its most important trading partners including China, Iraq, Turkiye, and the UAE.

According to Economy Minister Ehsan Khandouzi, the Islamic Republic currently conducts less than 10% of its trade in the dollar, down from nearly 30% in 2021. (source: https://thecradle.co/article-view/25499/nine-asian-central-banks-to-adopt-swift-alternative)