SWIFT’s Path to Tokenized Assets and Digital Currency Integration

On September 11, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) revealed its plan to “create pathways to practical solutions enabling our members to engage and transact with regulated digital assets and currencies.”

The organization aims to facilitate transactions between its members using both traditional and new crypto assets on its interbank network, as outlined in their vision.

Founded in 1973 in Belgium, SWIFT operates as a cooperative owned by the banks and member firms that utilize its services.

Connections to Ethereum?

Matthew Sigel, head of digital assets research at VanEck, pointed out that Ethereum is the sole layer-1 blockchain that SWIFT has referenced in its communications.

He further mentioned that their initiatives emphasize interoperability between traditional finance and advancing technologies, including tokenized assets and Central Bank Digital Currencies (CBDCs).

SWIFT unveils new initiatives for digital assets, focusing on regulated environments.
Their research aims at bridging traditional finance and emerging technologies like tokenized assets & CBDCs.
The only L1 ever mentioned by SWIFT is #ETH. https://t.co/l1NZsICIQm pic.twitter.com/P7kndmqcOH

— matthew sigel, recovering CFA (@matthew_sigel) September 11, 2024

The announcement acknowledged the increasing relevance of tokenized real-world assets (RWA), referencing Standard Chartered’s research that forecasts a market size of $30 trillion by 2034. It emphasized that there is a significant interest, with 91% of institutional investors eager to invest in tokenized assets.

SWIFT highlighted the existence of several fragmented “digital islands” arising from inconsistent platforms, technologies, and regulations, creating a complex environment for institutional investors navigating multiple tokenization platforms.

SWIFT has been actively exploring blockchain transfers and RWAs, asserting:

“Our successful blockchain interoperability trials demonstrated how Swift’s infrastructure can support the transfer of tokenized value across both public and private blockchains.”

Looking ahead, SWIFT aims to enhance its infrastructure to provide access to digital assets and currencies for various applications, allowing securities investors to pay for and exchange tokenized assets in real time.

“Initially, the payment leg will utilize existing fiat currencies, but eventually will incorporate tokenized forms of money, including CBDCs, tokenized commercial bank money, or regulated stablecoins.”

In the upcoming months, SWIFT intends to continue creating technical solutions in collaboration with the financial community.

No Crypto Usage on SWIFT

While the announcement appears promising for the cryptocurrency sector, it is improbable that users will be able to transfer decentralized digital assets like Bitcoin or Ethereum via the SWIFT network. However, this could significantly benefit the foundational infrastructure, such as Ethereum and Chainlink.

In September 2023, SWIFT conducted a test with banks using Chainlink’s Cross-Chain Interoperability Protocol (CCIP).

Earlier in the year, SWIFT announced a partnership with Chainlink, involving several financial institutions to explore the possibilities of integrating with various blockchain networks.