What did SWIFT do?
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global financial communications network that provides banks and financial institutions with standardized and secure communications networks.
As the hub for global cross-border payments and financial information transfer, SWIFT connects more than 11,000 institutions in more than 200 countries to ensure the efficient operation of international transactions.
It not only reduces the complexity and risk of cross-border transactions through a unified message format, but also promotes the interoperability of digital assets and emerging currencies, providing strong support for innovation in global financial markets.
This article reviews the important experimental results of SWIFT and looks forward to its future development direction in the fields of digital assets and central bank digital currency (CBDC).
We are forging a path towards real-world solutions that will allow our members to access and trade regulated digital assets and currencies on the SWIFT network. This follows a series of pioneering experiments with our community in recent years, and we are now entering the next phase.
Interest in digital assets and currencies continues to grow, and the past two years have given us a clearer understanding of the potential value of these developments in the industry.
Forecasts for the growth of digital assets vary. For example, Standard Chartered and Synpulse recently estimated that the real-world market for tokenized assets will reach $30 trillion by 2034. Market sentiment is strong, with 91% of institutional investors interested in investing in tokenized assets, according to a survey by Celent and BNY Mellon.
Our vision is to enable our members to leverage their SWIFT connection to trade using existing and emerging assets and currency types.
Eliminate digital silos
However, there are challenges that must be overcome before digital assets and currencies can truly scale on a global scale. Foremost among these is the growth of the different platforms, technologies and regulatory environments that underpin digital innovation. This has led to the formation of a fragmented "digital island" ecosystem, increasing the costs and risks of market participants' operations.
For example, institutional investors are unable to expand their digital asset businesses due to the complexity faced by multiple tokenization platforms. In terms of digital currencies, although the latest Atlantic Council data shows that more than 130 countries and monetary unions are currently exploring central bank digital currencies (CBDC), a lot of work still needs to be done to integrate these emerging currencies into the broader global economy. .
Driving global interoperability
Over the past 50 years, SWIFT has played an important role in promoting global interoperability and enabling fast, frictionless and secure transactions. As we enter the next phase of our strategy, we will continue to enhance our ability to interoperate with new systems, technologies, assets and currencies.
In our Innovation Labs, we have been actively exploring potential solutions for extending global interoperability to central bank digital currencies (CBDCs) and tokenized assets for several years. Recently, we have brought together industry forces to launch a series of ground-breaking research projects to explore how existing SWIFT capabilities and infrastructure can effectively support interoperability between different asset classes and network types.
Our successful blockchain interoperability experiment demonstrates how SWIFT’s infrastructure facilitates the transfer of tokenized value between public and private blockchains.
Our Phase 1 and 2 central bank digital currency (CBDC) sandbox projects – conducted in partnership with leading central banks and commercial banks from Europe, Asia and North America – demonstrate how we can connect CBDC across different networks, And connect multiple assets and cash networks.
Now we raise our goal to a higher level
Our vision is to enable our members to leverage their SWIFT connections to trade swaps using existing and emerging assets and currency types.
We have a proven track record of trading fiat currencies and securities instruments as a trusted and efficient central platform. Now, we are further developing our infrastructure to provide our members with equal access to emerging digital asset classes and currencies, covering multiple application scenarios such as payments, securities, foreign exchange, trading and more.
Building on our experience, we are paving the way for real-world solutions that interconnect all forms of digital assets and currencies – including plans to test multi-ledger Delivery to Payment (DvP) on SWIFT’s secure global platform and pay versus pay (PvP) transactions. In the future, this may enable buyers of securities to instantly pay and exchange tokenized assets on our network.
The cash component of DvP settlement execution is particularly challenging in the absence of a globally recognized digital currency. Therefore, we are looking for ways to connect the settlement of tokenized assets with the corresponding payment transfers on the SWIFT network. The payments component will initially use existing fiat currencies, but will later be able to use tokenized currency forms such as central bank digital currencies (CBDCs), tokenized commercial bank currencies, or regulated stablecoins.
Finally, we are also testing our interconnect capabilities as a technology solution for interconnecting emerging bank-led networks (such as the U.S. Regulatory Settlement Network) with other financial infrastructure.
What happens next?
While much has been achieved, there is still much work to be done.
We will continue to work with the financial community to develop the technology solutions needed to enable interoperability and access to digital assets and currencies. Over the coming months we will also explore the impact of implementation on workflows, standards and market practice requirements to achieve scale – more information will be available ahead of Sibos 2024.
We are excited about the future of digital assets and currencies on our network and will continue to work with our community to drive progress in this space.
This article is reproduced in cooperation with: Shenchao
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