The Society for Worldwide Interbank Financial Telecommunications (SWIFT) has completed a blockchain interoperability pilot that it says will unlock tokenization for financial institutions.
In its report, SWIFT said it provided a single point of access to multiple blockchain networks using its existing infrastructure. The report, titled “Connecting blockchains: Overcoming fragmentation in tokenised assets,” concludes that this access would allow banks and other entities to tap into blockchain tokenization.
The pilot is the latest by a global organization targeting tokenized assets. As blockchain adoption surges, tokenization is emerging as a key application. A 2022 survey by BNY Mellon found that 97% of institutional investors believe it will revolutionize asset management. They cited enhanced efficiency, cost reduction and fractional asset ownership as the key benefits.
However, with the existence of hundreds of blockchain networks, financial institutions would incur massive costs to tap into most of them. SWIFT’s pilot seeks to solve this challenge by creating a single point of access through which the banks can tap into any public or private network.
“For tokenisation to reach its potential, institutions will need to be able to seamlessly connect with the whole financial ecosystem. Our experiments have demonstrated clearly that existing secure and trusted Swift infrastructure can provide that central point of connectivity, removing a huge hurdle in the development of tokenisation and unlocking its potential,” commented Tom Zschach, the Chief Innovation Officer at SWIFT.
The La Hulpe, Belgium-based society partnered with major global banks on the pilot, including BNY Mellon, Citi, BNP Paribas, ANZ Bank, Lloyds Banking Group and Euroclear. It also worked with American clearing and settlement service provider DTCC and SIX Digital Exchange, the Swiss digital asset trading platform owned by the top Swiss stock exchange.
Commenting on the pilot, BNP Paribas’ Alain Pochet said that as banks integrate blockchain, interoperability has remained the key challenge. SWIFT’s solution would provide the easiest and most cost-effective solution and usher in a new era of mainstream tokenization, he believes.
“Establishing interoperability between existing financial market infrastructure and multiple blockchains will be critical for greater adoption so we were naturally delighted to participate in this experiment with the Swift community,” added ANZ’s Nigel Dobson.
SWIFT has been investing heavily in blockchain research, with a particular focus on CBDCs. Earlier this year, it completed the first phase of a 12-week study on cross-border CBDC settlements. It worked with BNP Paribas, NatWest, Royal Bank of Canada and other major banks on the study.
But while it seeks to position itself at the center of the CBDC revolution, these sovereign digital currencies could usher an end to its dominance in global finance. According to Bank of Russia Deputy Governor Olga Skorobogatova, CBDCs would allow countries to make multilateral financial transactions outside the SWIFT system.
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