This project will connect the SWIFT network to the Blockchain, allowing traditional financial players to access digital assets.
The interbank messaging system SWIFT has partnered with the Blockchains oracle provider Chainlink, with the aim of working on a proof of concept (PoC) project, which will allow traditional financial companies the ability to carry out transactions through Blockchain networks.
Chainlink co-founder Sergey Nazarov announced the project at the SmartCon 2022 Conference in New York on September 28, joined by SWIFT Chief Strategy Officer Jonathan Ehrenfeld Solé.
At the conference, Jonathan Ehrenfeld Solé indicated that there is an “undeniable interest of institutional investors in digital assets.” Furthermore, Solé added that these traditional financial players want to access digital and traditional assets through a unified platform.
The project will employ Chainlink’s Blockchain Interoperability Protocol (CCIP). Due to this, the platform will allow SWIFT messages to report token transfers on almost all Blockchain networks, which, according to Sergey Nazarov, will further drive the adoption of Blockchain through distributed ledger technology (DLT) in capital markets and traditional finance.
Currently, Chainlink is a major oracle network and is in the top 25 Blockchains, with a capitalization of $3.8 billion.
In August, SWIFT recorded an average of 44 million messages per day. In addition, it is currently the main messaging system used by banks to make cross-border payments quickly and safely.
SWIFT does not want to lose leadership in cross-border operations
This is not the first time that SWIFT has ventured into Blockchain technology. The interbank network SWIFT announced an offering last year to “test tokenization of real-world assets.” And previously, years ago, the firm SWIFT also collaborated with Chainlink on another proof of concept on bond issuance and redemption.
However, transactions on the SWIFT network could take several days to execute. The company has been exploring Blockchain and DLT technology and Central Bank Digital Currencies (CBDCs) to facilitate much faster payments.
Likewise, Chainlink added that this collaboration with SWIFT will allow financial institutions to obtain Blockchain capabilities without replacing, developing and integrating new connectivity in legacy systems, something that, according to Solé, would require “substantial modifications” at an “exceptionally high” cost.
In May, Mastercard CEO Michael Miebach said in an interview about CBDCs that he doesn’t expect SWIFT to exist in five years. This is a result of the exponential growth of CBDC competition in the cross-border payments and settlements sector.
Interoperability grows in the crypto ecosystem
The demand for interoperability between traditional finance and digital assets has increased in recent months and has been touted as the next big thing for cryptocurrencies, as well as for TradFi investors who are moving into digital assets.
Last week, platform Lit Protocol reported that it raised $13 million in a fundraising round led by crypto firm “1kx.” This, is with the aim of hiring developers to venture into decentralized ownership and interoperability between Blockchain protocols.
On the other hand, in August various projects linked to the Solana network came together to create the “Open Chat Alliance”, an interoperable messaging platform.
It is important to note that over the past year, SWIFT said it was planning a series of experiments in the first quarter of 2022 to “improve the exchange of information between participants and systems that interact during the lifecycle of tokenized assets.”
By Audy Castaneda
