The backbone of the global financial messaging system, Swift is taking a step towards becoming a full-fledged blockchain infrastructure provider.
This week, the network announced plans to build a shared ledger platform that will allow transactions that include stubcoins and tokenized assets across multiple blockchains.
Swift has long served as a messaging layer for the cross-border money movement, but the new platform has brought it closer to the centre of value transfer.
This is a major change, not just moving money itself, for a traditional financial organisation that has been known for handling communications between more than 11,500 banks.
The changing role of Swift
“The big development is Swift’s changing business model. Cryptography is now a macro Newsletter. “Today, Swift is not forwarding value. We send a message. ONCHAIN, message, forwarding is the same.
Acheson argued that the new platform could serve as a “switch” layer between digital currencies and tokenized assets, and could bridge otherwise siloed systems. However, she questioned whether Swift is still essential in the world of programmable money.
“Does Swift need in a tokenized financial system? No, not so, but there are connections with almost every global bank,” she said.
Idiot banks for stupid banks
These connections could give Swift an edge as banks are looking for a way to a blockchain economy.
“The industry is moving at a rapid pace, with stub-loub coins being adopted worldwide at such a speed that traditional banks have to look out for,” said Barry O’Sullivan, director of banking and payments at OpenPayd.
Swift said more than 30 financial institutions are already involved in the project. O’Sullivan expects more as demand and regulations become more clear. “It takes time to recruit, interoperability and regulate alignment,” he said. “But Swift clearly positions itself to play a meaningful role in shaping the evolving Stablecoin and tokenized asset ecosystem.”
According to David Duong, Coinbase’s head of institutional research, Swift’s platform could also “significantly reduce” technical barriers and integration costs for financial institutions that want to fill Stablecoins into their business.
O’Sullivan said the platform “may bring standardization to the global Stablecoin ecosystem,” but fragmentation is likely to last. “Existing private stubcoins, CBDCs and regional solutions may continue to work in parallel,” he said.
The year it was created
Duon described Swift’s initiative as a “basin moment” of both cryptography and traditional finances, but reminded me of how it has been going on over the years. The company has been experimenting with distributed ledger technology since 2017, Duong said it is conducting pilot projects on ChainLink, interoperability testing using tokenized securities platforms ClearStream and SETL and CBDC. Developing your own shared ledger platform appears to be the next step in that long-term transition, Duong said.
Still, not everyone considers Swift as a neutral player. Its role in enforcing sanctions has led to distrust in countries where banks are blocked from the network, Acheson said.
“Given the global distrust following our company and Swift’s role in implementing EU sanctions, it is not clear that its offering will stop fragmentation of payment systems,” she argued.
Still, Swift’s decision highlights that the boundaries between traditional finance and blockchain finance are increasingly intertwined, with the world’s largest financial institutions taking initiatives to stay relevant slowly, suddenly.
