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BRICS Explores Alternatives to SWIFT Payment System
ਖ਼ਬਰਾਂ ਵਿੱਚ ਕਿਉਂ?
Why is BRICS eyeing an exit from SWIFT? The CBDC and sanctions link GS-III tests
BRICS nations are exploring national-currency and CBDC-based alternatives to SWIFT for cross-border payments.
Why it matters: general awareness
What you need to know
2 ਮਿੰਟ
BRICS countries are exploring national-currency and central bank digital currency (CBDC)-based mechanisms for cross-border payments, amid concerns over dependence on SWIFT for international transactions.
SWIFT is a Belgium-headquartered global messaging network widely used by banks to process cross-border payments.
Reducing reliance on SWIFT is seen by BRICS members as a way to limit exposure to financial sanctions and diversify global payment infrastructure.
ਸਰੋਤ: Topper IAS editorial (PIB / The Hindu / Indian Express)
ਮੁੱਖ ਤੱਥ
Remember these
- SWIFT is a Belgium-headquartered global messaging network used by banks for cross-border payments
- SWIFT transmits payment messages; it does not itself hold funds or settle payments
- BRICS members are exploring national-currency and CBDC-based cross-border payment mechanisms
- Reducing SWIFT reliance is seen as a way to limit exposure to financial sanctions
- CBDC is the digital form of a country's fiat currency, issued by the central bank
ਪ੍ਰੀਲਿਮਜ਼ · ਮੇਨਜ਼
How the exam will ask it
ਪ੍ਰੀਲਿਮਜ਼
- SWIFT is a messaging network for cross-border payment instructions and is headquartered in Belgium.
- BRICS countries are exploring national-currency and CBDC-based mechanisms to reduce dependence on SWIFT.
- A CBDC is a legal-tender digital currency issued and backed by a central bank.
ਮੇਨਜ਼
GS-III Economy (international financial architecture) and GS-II (international groupings). Dependence on SWIFT exposes countries to financial sanctions, so BRICS is exploring national-currency and CBDC-based cross-border payments. The implication is a more diversified payment infrastructure, but interoperability, trust and currency convertibility remain challenges; the way forward is gradual, voluntary and interoperable systems, with India protecting its rupee-internationalisation interests.
Quick recall
Answer before you reveal
With reference to alternatives to the SWIFT payment network for cross-border transactions, consider the following statements:
- BRICS countries are exploring national-currency and central bank digital currency (CBDC)-based mechanisms to reduce dependence on SWIFT.
- SWIFT, the global messaging network widely used for international bank transfers, is headquartered in Belgium.
Which of the statements given above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
ਜਵਾਬ ਵੇਖੋ
ਜਵਾਬ: C — Correct: Both 1 and 2 — BRICS countries are exploring national-currency and CBDC-based cross-border payment mechanisms to cut reliance on SWIFT, and SWIFT is indeed a Belgium-headquartered global financial messaging network. • 1 only, 2 only — wrong: both statements are correct. • Neither 1 nor 2 — wrong: both statements are true.
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