SWIFT: Simplifying the global flow of digital assets and currencies, we're taking action
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SWIFT: Simplifying the global flow of digital assets and currencies, we're taking action
Our vision is to enable our members to leverage their Swift connections for interchanged trading, using existing and emerging asset and currency types.
Navigating Web3 tides with focused insightsAuthor: Payments
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SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global financial messaging network that provides banks and financial institutions with a standardized, secure communication infrastructure. As the central hub for cross-border payments and financial information exchange, SWIFT connects more than 11,000 institutions across over 200 countries, ensuring efficient international transactions. By standardizing message formats, it reduces complexity and risk in cross-border dealings while also advancing interoperability for digital assets and emerging currencies, providing strong support for innovation in global financial markets. This article reviews Swift’s key experimental achievements and outlines its future direction in digital assets and central bank digital currencies (CBDCs).
We are paving the way toward real-world solutions that will enable our members to access and trade regulated digital assets and currencies over the Swift network. This marks our entry into the next phase, following a series of pioneering experiments conducted with our community in recent years.
Interest in digital assets and currencies continues to grow, and the past two years have provided us with clearer insights into their potential value within the industry.
Forecasts on digital asset growth vary. For example, a recent estimate by Standard Chartered and Synpulse suggests that the market for tokenized real-world assets could reach $30 trillion by 2034. According to a survey by Celent and BNY Mellon, market sentiment is strong, with 91% of institutional investors expressing interest in investing in tokenized assets.
Our vision is to empower our members to leverage their Swift connectivity to transact using both existing and emerging types of assets and currencies.
Eliminating Digital Silos
However, before digital assets and currencies can truly scale globally, several challenges must be addressed. Chief among them is the proliferation of different platforms, technologies, and regulatory environments underpinning digital innovation. This has led to a fragmented ecosystem of "digital silos," increasing operational costs and risks for market participants.
For instance, institutional investors face complexities across multiple tokenization platforms, limiting their ability to scale digital asset operations. In the realm of digital currencies, despite the latest data from the Atlantic Council showing that over 130 countries and monetary unions are exploring central bank digital currencies (CBDCs), significant work remains to integrate these emerging currencies into the broader global economy.
Driving Global Interoperability
Over the past 50 years, Swift has played a crucial role in enabling global interoperability and facilitating fast, frictionless, secure transactions. As we enter the next stage of our strategy, we will continue enhancing interoperability with new systems, technologies, assets, and currencies.
In our innovation labs, we have been actively exploring potential solutions for extending global interoperability to CBDCs and tokenized assets for many years. Recently, we brought together industry players for a series of groundbreaking research initiatives to examine how existing Swift capabilities and infrastructure can effectively support interoperability across different asset classes and network types.
Our successful blockchain interoperability experiments demonstrated how Swift's infrastructure can facilitate the transfer of tokenized value between public and private blockchains. Our Phase one and Phase two CBDC sandbox projects—conducted in collaboration with leading central and commercial banks from Europe, Asia, and North America—showed how we can connect CBDCs across different networks and link multiple asset and cash networks together.
Raising the Ambition
Our vision is to allow members to use their Swift connectivity to conduct swap transactions involving both traditional and emerging asset and currency types.
We have a strong track record in facilitating transactions with fiat currencies and securities instruments as a trusted and efficient central platform. Now, we are further evolving our infrastructure to provide members with equitable access to emerging categories of digital assets and currencies, spanning applications in payments, securities, foreign exchange, trade, and more.
Building on our experience, we are laying the groundwork for real-world solutions that interconnect various forms of digital assets and currencies—including plans to test multi-ledger delivery versus payment (DvP) and payment versus payment (PvP) transactions on Swift’s secure global platform. In the future, this could allow buyers of securities to make real-time payments and exchanges of tokenized assets over our network.
The absence of a globally recognized digital currency makes the cash leg in DvP settlements particularly challenging. Therefore, we are exploring ways to link the settlement of tokenized assets with corresponding payment transfers conducted over the Swift network. Initially, the payment leg will use existing fiat currencies, but eventually it will support tokenized forms of money such as central bank digital currencies (CBDCs), tokenized commercial bank money, or regulated stablecoins.
Finally, we are also testing our interconnection capabilities as a technical solution to link emerging bank-led networks—such as the U.S. Regulated Settlement Network—with other financial infrastructures.
What’s Next?
While much progress has been made, there is still significant work ahead.
We will continue collaborating with the financial community to develop the technical solutions required to achieve interoperability and access for digital assets and currencies. In the coming months, we will also assess the implications for workflows, standards, and market practice requirements needed to scale these solutions—with further details to be shared ahead of Sibos 2024 in Beijing.
We are excited about the future of digital assets and currencies on our network and will continue working with our community to advance progress in this space.
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