In recent years, as the U.S. sanctions against Iran have escalated, Iran has been kicked out of SWIFT, the U.S.-led international financial communications system. External** payments are fundamentally separated from the SWIFT system. Confusingly, however, the United States can still freeze Iran's assets at any time. This article will explain why the United States is still able to freeze Iranian assets in light of the differences between SWIFT and CHIPS.
The SWIFT system is an international funds communication system managed by the Society for Worldwide Interbank Financial Telecommunication, which is mainly used for the transmission of cross-border transaction information and does not involve the settlement module. It is one of the infrastructures for the transmission of international payment information, but it is not the final infrastructure. Although Iran was kicked out of the SWIFT system, it can still use other payment systems to complete the transmission of cross-border transaction information and realize the final settlement of foreign funds.
The chips system (ClearinghouseInterbankPaymentsSystem) is a clearing system in the United States, which is used for the final settlement of the US dollar. The final clearing system for each currency is in the hands of the issuer of each currency, for example, the final clearing system for the renminbi is controlled by the People's Bank of China, and the final clearing system for the US dollar is controlled by the Federal Reserve. Regardless of the payment system through which information is transmitted, the final settlement needs to be completed through the final clearing system of each currency.
Iran holds $6 billion in assets for international purchases, but the United States has decided not to liquidate it. This means that other countries do not dare to receive this money and cannot complete the information transfer and settlement of US dollar funds between banks. As a result, Iran's assets have become currency symbols that cannot be paid, traded, and liquidated, and for it, they are not even as good as waste paper.
Other countries are also aware of this problem and are actively promoting local currency settlements, hoping to expand the use of their currencies on a global scale. In this way, when facing severe sanctions by the United States, the local currency held by each country will not be affected, and it can still be used freely in the international market, so as to avoid falling into trouble due to the unusability of the dollar.
Although the U.S. dollar can be internally moved in the accounts of major banks and businesses around the world, banks in any country cannot issue U.S. dollars on behalf of the Federal Reserve. The U.S. dollars in the bank and corporate accounts of other countries or regions are directly or indirectly flowing out of the United States, and new U.S. dollars cannot be created out of thin air. As a result, the inflow and outflow of dollars from these bank accounts is ultimately aggregated into the chips system in the United States, rather than being determined by banks in other countries.
In Argentina, for example, Argentine banks with the right to issue dollars are free to inject dollars into corporate accounts, which would lead to chaos and inflation. Therefore, other countries will not agree with this practice. While banks in Iran keep track of incoming and outgoing dollars, they do not have the right to issue dollars and cannot add dollars to an account out of thin air.
From the above analysis, we can conclude that although Iran was kicked out of the SWIFT system, the reason why it is still frozen by the United States is because Iran cannot complete the information transfer and settlement of funds between banks, and other countries dare not receive Iranian funds, which makes the assets in Iran's hands worthless. In addition, other countries are also actively promoting local currency settlement to reduce their dependence on the US dollar to cope with the possible risk of sanctions.
While the U.S. can freeze or unfreeze its assets through the chips system, other countries are also trying to find alternatives to ensure their own financial security in the international arena. The solution to this problem requires cooperation and joint efforts among countries to ensure the stability and sustainable development of the global economy.
As an important part of the global financial system, SWIFT and CHIPS play an important role in the international market. It is crucial for countries to understand how these systems work and their implications in order to better respond to international financial risks and to seek more stable and sustainable ways. It is only through cooperation and mutual trust among countries that a more open and just international financial order can be established.
In the context of globalization, the security and stability of international payments** are of paramount importance to all countries. After Iran was kicked out of the SWIFT system, although other payment systems could be used to transmit cross-border transaction information, its assets were still frozen because it could not complete the final settlement of funds. This highlights the importance of local currency settlements, and countries are working to promote the use of local currencies to reduce dependence on the US dollar and avoid the impact of sanctions.
By analysing the relationship between the clearing system and the asset freeze, we recognize the important role of the international financial system in maintaining global stability. At the same time, we have also seen the efforts and explorations of various countries in dealing with economic risks and protecting their own financial security. It is only through cooperation and joint efforts that a more just, stable and sustainable international financial order can be established.
In the face of the ever-changing international situation and challenges, all countries should strengthen communication and cooperation to promote the formation of a more open and inclusive international financial system. It is only through common development and prosperity that the goal of sustainable development can be achieved for the benefit of people around the world.