- Private and central banks across North America, Europe, and Asia are preparing for SWIFT-led digital asset trials, marking an important step in the development of blockchain technology’s use cases.
- The trials will explore how SWIFT can provide unified access to multiple digital asset classes and currencies for private and central banks.
- Tokenisation is rapidly growing, with US$2 billion in tokenised treasuries, driven by financial giants like BlackRock and blockchain projects.
Digital assets were probably a laughing stock for bankers a few years ago. But things can change, and pretty quickly, too. Global banks across North America, Europe, and Asia are now gearing up to participate in digital asset trials initiated by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Related: Franklin Templeton Brings $435 million Tokenised Money Market Fund to Aptos Blockchain
The trials will explore how SWIFT can offer private and central banks unified access to multiple digital asset classes and currencies.
From Experimenting to Testing Use Cases of Blockchain Technology
Looks like SWIFT spent some time doing a lot of research and experimentation. The firm is not just focusing on experimenting with private and public blockchains or central bank digital currencies (CBDCs).
It’s now fully committed to test actual use cases, such as payments, foreign exchange, and securities, enabling transactions like payment-versus-payment and delivery-versus-payment across multiple ledgers and more.
Tom Zschach, Chief Innovation Officer at Swift highlighted the interaction between TradFi and DeFi:
For digital assets and currencies to succeed on a global scale, it’s critical that they can seamlessly coexist with traditional forms of money. With our vast global reach, we are uniquely positioned to bridge both emerging and established forms of value, and we’re now focused on demonstrating this in real-world, mainstream applications,
Tom Zschach, Chief Innovation Officer at SwiftAccording to a report by Standard Chartered, the total value of tokenised assets is predicted to reach US$30T (AU$45T) globally by 2034. SWIFT previously shared this prediction when it started offering interoperable digital asset payments to institutional clients.
The Old Issue of Interoperability
A key challenge for SWIFT is addressing the interoperability issues between blockchains/ledgers. In an interview, Nick Kerigan, Swift’s head of innovation, said the move aims to prevent the creation of isolated “digital islands” where different systems cannot communicate effectively:
We’ve tried to help the industry figure out a way to ensure that wherever a digital asset or a digital currency is created, and whatever technology that’s created on, that those can successfully work together with each other and the existing financial system.
Nick Kerigan, Swift’s head of innovationWith “isolated islands of digital assets”, we can think of blockchain solutions developed by banks such as JPMorgan Chase and Citigroup. This leads to fragmentation in the industry, and it’s a problem because more institutions are keen to explore blockchain-based solutions like tokenising deposits and bonds like US treasuries. Hence, interoperability becomes crucial for seamless transactions.
Related: Bitwise Files Official Application for XRP ETF, SEC Commissioner Weighs in on Chances for Approval
To say the tokenisation sector is moving fast is an understatement, especially with tokenised treasuries, which are worth over US$2B (AU$2.9B) at press time, led by traditional giants like BlackRock, Franklin Templeton, and blockchain projects like Ondo Finance.
In Australia, the ANZ Bank has become the first bank in the country to join Project Guardian, a real-world asset tokenisation and blockchain initiative.
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