SWIFT, the global interbank messaging system that handles approximately $5 trillion in daily volume, has announced its collaboration with banking partners worldwide to conduct trials for cross-chain tokenized asset transfers.
“There’s unlikely to be a single prevailing blockchain network,” said Tom Zschach, Chief Innovation Officer at Swift. “We would expect to see a multitude of different platforms emerging, each serving different customer segments with their own bespoke capabilities and… pic.twitter.com/zOkUjRxde6
— BitKE (@BitcoinKE) June 24, 2023
According to a recent statement, SWIFT said that, by leveraging its established infrastructure, it aims to explore the feasibility and functionality of enabling the transfer of tokenized assets across different blockchain networks.
“More institutions are beginning to explore how to serve customers on both permissioned and public blockchain networks like Ethereum,” said Jonathan Ehrenfeld, Head of Securities Strategy at SWIFT.
“Our experiments will help advance the industry’s understanding about the technical and business requirements involved when interacting with and between multiple blockchain networks.”
In the initial phase of testing, SWIFT’s initiative will focus on conducting transfers using Ethereum’s Sepolia testnet. The tests will involve transferring tokenized assets between the Ethereum mainnet (public blockchain) and a permissioned blockchain.
Additionally, SWIFT will explore transfers between the Ethereum network and other public blockchain networks.
More than a dozen financial institutions will participate in the initiative, including:
- Citi
- BNY Mellon
- Lloyds Banking Group
- BNP Paribas
- Australia and New Zealand Banks
SWIFT’s potential addition of support for public blockchains has the potential to be a significant boost to the Web3 sector. By exploring the operational efficiencies offered by blockchain technology, SWIFT aims to create an environment that can attract more investors into private markets and enhance liquidity.
In 2018, the Financial Times estimated that SWIFT, as a global interbank messaging system, handled approximately 50% of global cross-border transactions. However, the report also highlighted criticism leveled against SWIFT for its perceived inefficiency and limitations in terms of transaction speed, cost, and transparency.
SWIFT acknowledges the growing interest among institutional investors in tokenized asset investments. However, it recognizes that the technical complexity of the multi-chain Web3 ecosystem can introduce challenges and inefficiencies in managing and trading these assets.
“In such a highly fragmented ecosystem, it would simply not be feasible for financial institutions to connect to each and every platform individually,” said Tom Zschach, CIO at SWIFT.
“Overcoming this fragmentation will be key to the long-term scalability of the market.”
Ehrenfeld also emphasized the need for interoperability between blockchain protocols and legacy infrastructure.
“Instead of building new infrastructure and technology stacks entirely from scratch, financial institutions want to leverage their existing infrastructure to connect to blockchain ledgers,” he said.
The pilot program initiated by SWIFT aims to delve into the regulatory and operational challenges that financial institutions may face when engaging with tokenized assets.
Chainlink is working with @swiftcommunity and more than a dozen major financial institutions on experiments to enable connectivity to and interoperability across public and private blockchains: https://t.co/TphsIU6A3O
These experiments are a significant step forward from the… pic.twitter.com/6UEvp22LM9
— Chainlink (@chainlink) June 6, 2023
Chainlink, a leading Web3 oracle provider, will enable SWIFT to interact with Sepolia and will contribute its cross-chain interoperability protocol to the initiative.
SWIFT has previously indicated that its cross-chain interoperability trials could lay the groundwork for the launch of Central Bank Digital Currencies (CBDCs).
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