![]() It does not mean foreign institutions won’t take part – HSBC, Standard Chartered and Bank of East Asia, all with highly geared China franchises, are shareholders. So, simply put, merely participating in CIPS means helping China to build its own financial and monetary structure distinct – but not necessarily severed – from the US-led system that has dominated global finance and trade since 1945. On the one hand, CIPS is the “logical partner of choice right now for Russia”, says Zennon Kapron, the Singapore-based founder of financial technology consultancy Kapronasia. But in the wake of Russian hostility, and the wave of sanctions that followed, two key questions are now being asked.įirst, can China use this moment to accelerate the adoption of its homegrown system beyond its borders? And second, now that many – though not all – of Russia’s banks are excluded from Swift, will Beijing allow them to use CIPS as a workaround? Swift has been only too happy to help.įor most of its short life, CIPS went largely unnoticed. ![]() So far, CIPS has opted not to go the extra step and create its own Swift-like messaging system, preferring to collaborate rather than compete with its far larger rival. ![]() It lets global banks clear cross-border yuan-denominated transactions directly onshore, rather than in clearing houses located in offshore yuan hubs such as Hong Kong. The result was the Cross-Border Interbank Payment System (CIPS), run by the People’s Bank of China. In 2015, a year after Russia annexed Crimea, leading to a first wave of US and EU sanctions, China set out to create its own version of Chips. All have US offices and are privy to US law, making it easy to catch and penalise offenders. Chips is a private club comprising 43 financial institutions, which collectively settle $1.8 trillion in claims every day, using a pre-funded account at the Federal Reserve. Swift is based in Belgium, but has a data centre in Virginia. The three pillars of the US financial system are the dollar, Swift (the main cross-border communications channel for banks), and the Clearing House Interbank Payments System (Chips). It has also failed to make much of a dent in the US’s financial hegemony. ![]()
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