SWIFT and Chainlink Partner to Test Blockchain-based Bank Transfers for Tokenized Assets
SWIFT, the renowned interbank messaging system, has joined forces with Chainlink, a provider of real-world data to blockchains, to conduct tests on bank transfers using blockchain technology. The partnership aims to explore the potential of using SWIFT’s infrastructure to facilitate the transfer of tokenized assets across various blockchains, with Chainlink providing connectivity across both public and private networks.
The experiment will involve major financial institutions and market players such as the Depository Trust and Clearing Corporation, Australia and New Zealand Banking Group Limited, BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX), and others. By leveraging SWIFT’s existing infrastructure and connectivity, these institutions will examine how they can efficiently instruct the transfer of tokenized value over a range of blockchain networks.
The market for tokenized assets is gaining significant interest from institutional investors as they seek new forms of value. However, the challenge lies in the fragmentation of blockchain networks, each with its own functionalities and liquidity profiles. This lack of interoperability creates obstacles and inefficiencies in managing and trading these assets. Overcoming this fragmentation is crucial for the long-term scalability of the market.
The collaboration between SWIFT and Chainlink builds on successful trials conducted in 2022. It aims to address the complex operational and regulatory challenges faced by financial institutions when operating in a blockchain environment. While blockchain technology holds great potential for generating efficiencies and reducing costs in capital markets, trading tokenized assets remains a niche activity in the regulated space. To unlock the market’s full potential, financial institutions must be able to seamlessly interact with multiple blockchain networks in a secure and trusted manner.
Tom Zschach, Chief Innovation Officer at SWIFT, emphasized the need for an interoperability model in a highly fragmented ecosystem. As different platforms emerge, serving various customer segments with bespoke capabilities, it is impractical for financial institutions to connect individually to each platform. Therefore, the community is working with SWIFT to develop a solution that enables global access to different platforms.
The experiments conducted by SWIFT and Chainlink aim to demonstrate how SWIFT’s infrastructure can facilitate interoperability between existing systems and both public and private blockchain networks. The tests will involve transferring tokenized assets between wallets on the same public blockchain network, from a public blockchain to a permissioned blockchain, and from Ethereum to another public blockchain. Chainlink’s technology will serve as an enterprise abstraction layer, securely connecting the SWIFT network to the Ethereum Sepolia network, while its Cross-Chain Interoperability Protocol (CCIP) will enable seamless data and value transfer between the source and destination blockchains.
Jonathan Ehrenfeld, Head of Securities Strategy at SWIFT, highlighted the importance of supporting activities on both permissioned and public blockchain networks. These experiments will shed light on the technical and business requirements involved in interacting with multiple blockchains. They will also underscore the value of using a blockchain interoperability protocol to securely transfer data and value between legacy systems and an unlimited number of blockchains.
In addition to the technological considerations, the experiments will address non-technological aspects that regulated institutions need to consider when engaging in cross-network transactions. Operational, compliance, and regulatory challenges, including confidentiality, privacy of data, liability, and recourse, will be explored to ensure a secure and compliant environment for financial institutions.
The collaboration between SWIFT and Chainlink represents a significant step toward unlocking the potential of blockchain technology in the financial industry. By leveraging SWIFT’s existing infrastructure and connectivity, financial institutions can simplify their operations, reduce costs, and minimize technology obsolescence risks. Ultimately, this initiative aims to remove friction in tokenized asset settlement and pave the way for the widespread adoption of blockchain-based finance.
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