The global Swift messaging network will allow commercial and central banks to conduct live trials of digital-asset transactions starting next year, marking a major step toward mainstream institutional adoption of blockchain technology, according to a report from Bloomberg.
After conducting blockchain-based transaction experiments in test environments, Swift will now facilitate real money and asset movements across different blockchain ledgers.
Nick Kerigan, Swift’s head of innovation, explained that this development aims to link various platforms on which central and private banks have been experimenting with blockchain technology.
Swift is seeking to avoid the creation of isolated “digital islands” and ensure interoperability between different digital currencies and blockchain technologies within the existing financial system.
Banks Promoting Blockchain Adoption
Because banks like JPMorgan Chase and Citigroup have been developing their blockchain platforms for a while, the industry is fragmented and networks are difficult to integrate. Swift’s action is considered a critical step towards integrating these separate systems, given the surge in the use of blockchain technology for tokenising assets such as bonds and deposits.
According to Standard Chartered, tokenised assets could be worth $30 trillion globally by 2034, highlighting the significance of incorporating blockchain technology into the current financial system.
Globally supervised by central banks, Swift links over 11,000 financial institutions in 200 countries and facilitates daily transactions worth trillions of dollars. Money transfers between lenders are made possible by the network’s millions of encrypted communications.
From Sandbox to Live Transactions
Swift started testing blockchain in 2021, with an emphasis on enabling CBDCs and carrying out tests in a regulated testing environment. Swift is now going one step further and bringing digital asset trials to its live network for the first time. These trials will address securities settlement as well as payments; however, the particular banks taking part in these trials have not been made public.
However, significant organisations like Deutsche Bank, HSBC, Santander, and Sumitomo Mitsui Banking Corp. have participated in blockchain experiments in the past.
Blockchain technologies and virtual currencies could become more popular and threaten Swift’s established position. Some banks have eschewed Swift’s messaging network in favour of creating their blockchain-based communication platforms. Despite this, Kerigan underlined that Swift’s usefulness comes from its widespread application and technological adaptability.