Russia, China Set to Work on New Payment System

November 9, 2016 by

The geopolitical situation has been a strange one for some time now, and recently, Russia has come under some fire from the international community.

Perhaps sensing that such matters may get worse before they get better, a new report from Reuters says that Russia may be working on a new payments system that works with those seen in China.

The Reuters report draws from an interview with Dmitry Medvedev, current Prime Minister of Russia, who notes that Russia has already created a payments system known as Mir, which is geared toward getting away from largely Western monoliths like Visa and Mastercard.

Since recently, both stopped providing services to one bank following the leveling of sanctions against Russia, Russia saw a clear need for a payment system that wouldn’t be shut down at someone else’s whim.

So, with Mir on the table, Medvedev then turned to China, and looked to see how Mir could be made compatible with Chinese payment systems, thus expanding its reach and capability. Such a move would reduce the importance of the SWIFT payment system, among others of the kind, and the end result would be a system that had more competitors and more opportunities as a result.

Medvedev said “In this respect, this kind of cooperation is very useful because, in this situation, no one will be able to block the development of financial traffic. I believe that the use of the yuan in mutual settlements, the use of positions opened in yuan and rubles, mutual financial transaction technologies and the use of co-branding cards — all of this is very useful for our countries.”

Competition is a valuable thing, and likely there are plenty of dollar-denominated interestes that are very concerned about this right now. The loss of SWIFT’s impact as a potential economic weapon could be bad news for future diplomatic efforts, though there are plenty who would say that SWIFT never should have been a weapon to begin with.

In the end, we’re seeing an expansion of payment systems afoot, going beyond Visa, Mastercard and SWIFT. That’s undiscovered country afoot, and what it may mean could be unforeseeable by even the most experienced market observer.

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