SWIFT, a banking cooperative company, plans to explore how it can support interoperability in developing the tokenised asset market. The firm has partnered with Clearstream, SETL, Northern Trust and other market players from the tokenised and traditional asset ecosystem to work on an innovative pilot program that aims to examine the delivery versus payment (DVP), issuance and redemption processes to support a seamless and frictionless tokenised asset market. The experiments will utilize both major methods of payments as well as central bank digital currencies.
The digital asset market is anticipated to grow rapidly, with its volumes expected to reach $24 trillion by 2027. In this regard, SWIFT wants to conduct multiple experiments together with market players (such as global custodians, local custodians, market infrastructures, securities firms and banks) to examine how they can enhance interoperability between firms operating in the market and systems during the transactional lifecycle of tokenised assets. One of the major risks in a world where traditional and tokenised assets exist together is developing various platforms, technologies and regulatory environments. SWIFT aims to ensure interoperability that interconnects market players and simplify their business operations by completing activities centrally that would otherwise be carried out bilaterally between institutions.
SWIFT will work with Clearstream, SETL, Northern Trust and other participants on the experiments to integrate the various DLT environments and use their PORTL suite of products to enable transaction orchestrations. PORTL offers a permissioned and robust toolset for financial institutions to develop applications that interoperate between existing infrastructures and various enterprise ledger technologies like DAML, Besu, Corda, Fabric as well as SETL’s high-performance ledger. The test will examine the benefits and feasibility of SWIFT as an interconnector that links up various types of cash-leg payments and multiple tokenization platforms.
Thomas Zschach, the Chief Innovation Officer at SWIFT, talked about the development: “As a neutral cooperative with a reach across 11,000 institutions in more than 200 countries, and oversight by central banks globally, Swift is uniquely placed to engage closely in the future of securities. We look forward to this set of new experiments and innovating collaboratively with market participants on the emerging trend of tokenised assets.”
Digitalizing Capital Markets
The development by SWIFT comes at a time when digital assets are increasingly moving towards mainstream adoption across the world. From financial service providers and traditional banks to retail customers, digital assets are on the increase. Several of such assets are showing the potential of disrupting the financial market dominated by traditional players. While such assets have received widespread attention, large institutions are taking notice as 86% of the world’s central banks are examining the possibility of launching digital currencies.
Major banks are increasingly becoming exposed to cryptocurrencies. Citigroup recently started offering crypto trading and custody services. Banco Bilbao Vizcaya Argentaria (BBVA), Spain’s second-largest bank, recently launched a Bitcoin trading service for its private clients. Besides banks, payments firms like PayPal, Visa, and Mastercard are getting involved in crypto assets to offer to their customers. Infrastructure providers such as SWIFT and Accenture and others are trying to position themselves as potential carriers for digital assets like CBDCs. SWIFT thinks that it can play a role by connecting the digital assets ecosystem to the traditional financial world.
