Today, Citi and Swift unveiled a historic study that demonstrates the viability of using a Payment-versus-Payment (PvP) process to settle payments between fiat and digital currencies.
The trial demonstrates a strong hybrid paradigm for interoperability between Distributed Ledger Technology (DLT) networks and conventional financial systems.
How was it done?
This was accomplished by utilising the already-existing Swift infrastructure, which was smoothly enhanced with orchestrators, smart contracts, and institutional-grade blockchain connections.
“These trials with Swift represent a significant leap forward in understanding and developing the infrastructure required to support digital currency transactions,” said Ayesa Latif, Head of FX Products.
“Our collaboration has demonstrated how existing financial systems can be enhanced with blockchain technology to unlock new levels of speed, transparency, and risk reduction in cross-currency settlements.”
Jonathan Ehrenfeld, Head of Strategy at Swift, said: “Swift is uniquely positioned to be the secure and trusted single point of access for seamless connection between the tokenised ecosystems and the established global financial community.”
“This collaboration with Citi proves that we can leverage the reach of our existing network while introducing advanced capabilities required to orchestrate fiat-digital currency PvP.”
The project demonstrates Citi’s dedication to providing cutting-edge, customer-focused, and expandable solutions for the digital asset ecosystem.
The trials represent a critical turning point in the creation of market-ready, scalable, and standardised solutions that can be integrated into international financial systems.
Growth of digital currencies
Tokenised deposits, stablecoins, and other digital currencies are growing at an unprecedented rate, offering a chance to transform financial infrastructure and cross-border payments.
According to Citi GPS, the overall issuance market for stablecoins might reach USD 1.9 trillion by 2030 due to growing use cases and improved legal certainty.
According to the paper, the monthly transaction volume of stablecoins is close to USD 1 trillion, although their primary function is that of an intermediary. As a result, receivers of stablecoins, which are mostly valued in US dollars, frequently decide to convert them into local fiat money.
Despite this desire, settlement between fiat and digital currencies, like stablecoins, remains difficult because of their basic differences. Digital currencies are maintained by user wallets on different blockchains and often do not permit reversal transactions, in contrast to fiat currencies, which are normally kept within accounts at correspondent banks.
A comprehensive communications standard that can follow the whole process, from transaction initiation to settlement confirmation, was created by Citi and Swift. The different data fields and features present in fiat-digital currency transactions are specifically taken into consideration by this standard.