SWIFT battling Russia, China's crypto use to dodge sanctions
The Society for Worldwide Interbank Financial Telecommunications (SWIFT), the Western-led global financial transfer system, has implemented various control measures for banks to identify those who use cryptocurrencies to assist Russia and China bypass Western sanctions, including those imposed over the Ukraine war, according to a SWIFT executive.
'There is a number of different controls that are built into the system, and things that financial institutions and banks can use to manage and permit the traffic that happens over the SWIFT network,' SWIFT's Chief Innovation Officer Tom Zschach told Asia Times in the Q&A session at a London cryptocurrency event on May 6.
'It's a pretty mature infrastructure that we have in place. It's all driven by our banks, around the agreements they have in place to transact with any of the counterparties around the world,' he said. 'It's pretty robust. It's been in place for quite some time, and it helps to support things, even in the future, with some of the ideas we see rolling out around automatic compliance.'
Currently, SWIFT offers the Customer Security Programme (CSP) and the Customer Security Controls Framework (CSCF) to help financial institutions monitor suspicious or sanctions-dodging transactions.
Zschach's said his primary responsibility is to drive innovation across SWIFT and collaborate with the SWIFT community and partners to prevent the fragmentation of international payment markets amid the rise of cryptocurrencies.
However, at the Digital Assets Summit organized by the Financial Times on May 6, media members were more interested in SWIFT's efforts to prevent Russia and China from evading sanctions and moving to a different payment system.
Zschach did not name Russia and China specifically but stressed SWIFT's increasing role in ensuring the world stays connected in today's geopolitical situation.
'The geopolitics impacts many different areas, including payments,' he said. 'We could build 'digital islands' and start to create different networks that aren't connected. But nobody wins from the fragmentation.'
'In the US, there's a pullback from globalization…. Now, SWIFT plays an even more important role in ensuring the world stays connected and that we don't lose the trust and the ability to scale.' Tom Zschach says SWIFT wants to ensure the world stays connected in cross-border payments. Photo: Asia Times / Jeff Pao
His comments came after Reuters reported in March that Russia has used cryptocurrencies such as bitcoin, ether and stablecoins such as Tether (USDT) to effectively bypass Western sanctions in its estimated US$192 billion oil trade with China and India.
Stablecoins are digital assets that use blockchain technology to peg to the US dollar. They allow 'T+0' or same-day settlement for cross-border transactions, while a traditional wire transfer can take up to five working days.
Traditional cryptocurrencies such as Bitcoin have a limited supply and high volatility as they are made through time-consuming and heavy electricity-using 'mining' activities. Stablecoins have an unlimited supply as long as they are backed by dollars.
Crypto trading, which does not involve the SWIFT system, creates an environment for money laundering, cybercrime, and sanctions evasions. Crypto exchanges and related banks are responsible for 'knowing your customer' (KYC).
The US Treasury's Office of Foreign Assets Control (OFAC) often sanctions companies and bourses in Russia, North Korea and Venezuela for suspicious crypto activities.
After Russia invaded Ukraine in February 2022, the US, European Union (EU), United Kingdom (UK) and Canada agreed to punitively purge seven Russian banks from the SWIFT system.
China had once settled trade transactions with Russia in renminbi but the US deterred that workaround with secondary sanctions.
Russia and China then settled their transactions in more complex, harder-to-decipher ways. For example, Russians bought Chinese electronic parts and paid in gold, precious metals or gemstones, which were sold to the Middle East for US dollars. Hong Kong is both a logistics and financial hub for such operations.
Last year, the US Treasury curbed these activities by sanctioning a group of Hong Kong and Chinese companies and threatened to sanction some small Chinese banks.
The Wall Street Journal reported in April last year that intermediaries and smugglers have turned to using Tether to buy weapons and equipment for Russia's defense industry. Some quoted in the article estimated this 'shadow trade' at $10 billion a month.
Last September, Russia reportedly opened two crypto exchanges in Moscow and St Petersburg to support external trade.
'Could crypto eventually provide a 'workaround' to sanctions enforcement and prohibitions on terrorist financing?' researchers at the Washington-based Brookings Institution weighed in a report last year. 'The fundraising techniques of those seeking to evade sanctions and prohibitions could easily become more sophisticated.'
The report said stablecoins could also become a way for terrorists to launder funds.
On January 23, US President Donald Trump signed an executive order encouraging the growth and use of digital assets, blockchain technology and related technologies across all sectors of the US economy. Steve Lee, co-founder of Neoclassic Capital, says Asian countries are building their crypto exchanges. Photo: Asia Times, Jeff Pao
Steve Lee, co-founder of Neoclassic Capital, said at the Digital Assets Summit that many Asian countries are quickly building new crypto exchanges.
'Japan has been very progressive regarding crypto regulations since 2017. They are now aiming to lower the tax rate on crypto gains from 55% to 20%,' Lee said. 'In South Korea, institutions might be able to start trading cryptos by the end of this year.'
'Singapore is easing its regulations to attract global crypto players, such as Robinhood Crypto (a US-based bitcoin trading platform),' he added.
It remains unclear whether these Asian crypto exchanges will become new platforms for Russian and Chinese companies to circumvent US sanctions.
In a crypto roadmap unveiled last November, the UK's Financial Conduct Authority outlined its policy publications for regulating stablecoins, crypto firms, and exchanges. It will finalize the rules in 2026.
Multinational law firm Pinsent Masons said in March that crypto companies have begun self-reporting suspected breaches of sanctions against Russia to the UK government. Three out of 50 self-reports originated from crypto firms, while others were from financial institutions.
Read: US warns Chinese banks over Russian shipments
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Asia Times
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The once-thriving textile sector, exemplified by the now-defunct Sritex conglomerate in Solo, has been unable to keep up with the price competition from cheap Chinese imports. Small and medium-sized manufacturers in ceramics and steel are also increasingly being squeezed by Made in China goods. Though the Indonesian government has responded by levying anti-dumping duties on select products, such as nylon film from China, Thailand and Taiwan, these actions have largely been reactive and insufficient to counteract the scale and pace of Chinese trade redirection. The longer this continues, the more it will undermine local industry, employment and economic self-sufficiency. The economic repercussions are only one layer of the problem. What makes this fissure particularly dangerous is its potential to metastasize into social tension. Indonesia's multi-ethnic composition includes a sizable Chinese-Indonesian minority that has historically been subject to scapegoating during economic downturns. The riots of May 1998, which led to the collapse of the Suharto regime, serve as a chilling reminder of how quickly economic grievances can morph into ethnic-based violence against ethnic Chinese. In the current climate of economic pressure and increasing unemployment—especially among urban manufacturing workers—there is a real risk that the narrative of Chinese imports 'destroying local industry' could morph into resentment directed at Chinese-Indonesian entrepreneurs, many of whom operate in retail, logistics and trade. In an age where social media can amplify divisive messaging in real-time, the potential for misinformation and targeted ethnic vilification should not be underestimated. At the regional level, Indonesia's predicament reflects a broader structural challenge in ASEAN. Countries like Malaysia, Thailand and Vietnam have also experienced spikes in Chinese imports, particularly in sectors like automobiles and electronics. The nature of these imports—often heavily subsidized and arriving in large quantities at prices below prevailing market rates—suggests deliberate Chinese dumping. Yet ASEAN's current mechanisms are ill-equipped to deal with these surges in a coordinated manner. Each country acts on its own, imposing unilateral anti-dumping tariffs or seeking redress through domestic trade tribunals, thereby diminishing the strength of a collective ASEAN-wide economic position. What is needed is not isolationism but a recalibration of engagement. Indonesia and ASEAN must articulate clearer expectations in their trade relationships with China. Fairness, reciprocity and respect for domestic industries must be at the heart of any economic partnership. The notion that Southeast Asia should serve as China's release valve for overproduction is not only economically detrimental but geopolitically short-sighted. It risks turning ASEAN from a central strategic partner into a passive buffer zone—absorbing external shocks without the tools to respond effectively. Equally important is ASEAN's need to revive its own internal trade capacities. The ASEAN Economic Community was envisioned to deepen intra-regional trade and investment, yet the share of intra-ASEAN trade has remained stagnant at around 22–24% over the past decade. This is far below the intra-regional trade levels of the EU, which stands at around 60%. Reducing non-tariff barriers, streamlining customs procedures and improving regional logistics are all urgent if ASEAN is to build internal economic resilience. Greater economic interdependence within ASEAN would not only mitigate vulnerability to external dumping but also foster shared growth that benefits smaller economies equally. For Indonesia, the road ahead demands bold policy interventions. The country must begin by strengthening its industrial strategy—reinvesting in productivity, technological upgrading and workforce development—so that its manufacturing sectors are not merely shielded but revitalized. Trade defense instruments must be improved, not only in terms of speed and scope but also in coordination with ASEAN partners. The government should also launch public education campaigns that preempt the ethnicization of economic issues. The messaging must be clear: this is not a conflict between ethnic groups but a structural issue in global trade dynamics that requires unity, not division. China, for its part, must recognize that sustaining goodwill in Southeast Asia cannot rely solely on infrastructure investment or diplomatic fanfare. It must pay heed to the social consequences of its trade behaviors. Dumping excess production into Indonesia and other ASEAN markets may offer short-term economic relief for Chinese exporters, but it risks breeding long-term resentment, social instability and strategic blowback in a region vital to China's Belt and Road Initiative ambitions. The growing trade imbalance between Indonesia and China is not yet a fracture—but it is undeniably a fissure, one that reveals the fragile interconnections between economic policy, social harmony and geopolitical alignment. Whether this fissure is widened or closed depends on the wisdom and coordination of both Indonesia's domestic leadership and ASEAN's collective diplomacy. To ignore it would be to misread not only the fragility of Indonesia's pluralistic society but also the limits of ASEAN's absorptive capacity. By addressing this issue with fairness, clarity and resolve, Indonesia can lead the region in forging a more balanced relationship with China—one that respects economic sovereignty, sustains regional stability and ultimately preserves the dignity of Southeast Asia's diverse peoples. Phar Kim Beng, PhD, is professor of ASEAN Studies, International Islamic University Malaysia and senior visiting fellow at the University of Cambridge. Luthfy Hamzah is senior research fellow of ASEAN Studies at Strategic Pan Indo Pacific Arena.
