Swift, the world's leading provider of secure financial messaging services, has announced it is developing a blockchain-based settlement solution. This initiative will enable its network of member banks to access regulated digital assets via distributed ledger technology (DLT) and facilitate cryptocurrency transactions. This significant step signals a pivotal shift in traditional finance, acknowledging blockchain's potential to revolutionize cross-border payments and asset tokenization.
The New Vision for Global Transactions
Swift's new strategy focuses on integrating blockchain to enhance the speed and efficiency of international settlements. The goal is to allow financial institutions to use their existing Swift infrastructure to transact with both traditional and emerging asset classes seamlessly. This move is driven by growing interest in digital assets and a clear recognition of the value they bring to the global financial ecosystem.
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People's interest in digital assets and cryptocurrencies continues to grow. Over the past two years, the potential value of these developments has become increasingly evident. Our vision is to enable our members to leverage their Swift systems to conduct transactions using both existing and new asset types.
Understanding Multi-Ledger Payment Systems
Swift is currently testing two innovative settlement mechanisms based on distributed ledger technology: multi-ledger Delivery-versus-Payment (DvP) and multi-ledger Payment-versus-Payment (PvP). These systems differ from traditional DvP and PvP by operating across multiple parallel ledgers, which can represent different national or institutional blockchain networks.
This multi-ledger approach allows for rapid cross-border settlement of tokenized securities, commodities, or foreign exchange transactions. If both sender and receiver operate on compatible DvP or PvP standards, transactions that currently take up to two days could settle in under 15 minutes—essentially the time it takes to confirm a single block on the blockchain.
We are paving the way for practical solutions that interconnect various forms of digital assets and currencies. This includes testing multi-ledger DvP and PvP transactions on Swift's secure global platform. In the future, securities buyers could instantly pay for and exchange tokenized assets over our network.
The Ethereum Connection
Industry experts analyzing Swift's technical approach suggest the system may be built on or compatible with Ethereum or Ethereum-based code. This would allow Swift to leverage existing Ethereum Virtual Machine (EVM) compatible infrastructure and ecosystem tools while adapting them for traditional finance applications.
The implementation of cross-border cash settlement using multi-ledger DvP presents significant regulatory challenges. Current international financial regulations have not kept pace with these technological developments. Therefore, Swift will initially focus on applying distributed ledger technology to existing fiat currencies before expanding to tokenized assets as regulatory frameworks mature.
This work will initially use fiat currencies. Later, we plan to evolve it to include central bank digital currencies (CBDCs), tokenized commercial bank money, and regulated stablecoins.
The Rising Importance of Tokenized Real-World Assets
Swift's blockchain initiative is particularly focused on the emerging market for tokenized real-world assets (RWA). According to a report from Standard Chartered and Synpulse, the RWA market is projected to reach $30.1 trillion by 2034. This growth potential makes blockchain infrastructure essential for traditional financial institutions seeking to remain relevant in the evolving financial landscape.
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Tokenization and digital currencies have tremendous potential to shape how we pay and invest in the future. But this potential can only be realized if the different approaches being explored are able to connect and work together.
Swift's Strategic Position in the Evolving Financial Ecosystem
Swift (the Society for Worldwide Interbank Financial Telecommunication) serves as the foundational messaging infrastructure connecting global banking institutions. Essentially, Swift provides the codes and identification systems that banks use when processing international wire transfers and exchanging financial messages.
As a trusted and efficient central platform for transactions using fiat currencies and securities instruments, we have a strong track record. Now we're further developing our infrastructure to provide our members with the same level of access to emerging digital asset classes and currencies across payments, securities, foreign exchange, trade, and other use cases.
This development represents not just a technological upgrade but a fundamental reimagining of how value can move across borders in an increasingly digital financial world.
Frequently Asked Questions
What is Swift's blockchain project?
Swift is developing a blockchain-based settlement system that will enable member banks to access regulated digital assets and facilitate cryptocurrency transactions. The system will use multi-ledger technology to streamline cross-border payments and asset tokenization.
How will blockchain improve international transfers?
Blockchain technology can significantly reduce settlement times for international transactions. Swift's new system could potentially reduce processing times from up to two days to under 15 minutes by leveraging distributed ledger technology and smart contracts.
What are tokenized real-world assets?
Tokenized real-world assets (RWA) are traditional assets like real estate, commodities, or financial instruments that are represented as digital tokens on a blockchain. This allows for fractional ownership, easier transferability, and increased liquidity for assets that were previously difficult to divide or trade.
When will Swift's blockchain system be operational?
Swift is currently in the testing phase of its blockchain solutions. The initial implementation will focus on fiat currency transactions, with plans to expand to CBDCs, tokenized commercial bank money, and regulated stablecoins as regulatory frameworks develop.
Will Swift's system use cryptocurrency?
While Swift's system will facilitate cryptocurrency transactions, it will primarily focus on regulated digital assets including potentially CBDCs and tokenized traditional assets. The infrastructure is designed to bridge traditional finance with emerging digital asset classes.
How does this affect traditional banking customers?
End banking customers will likely experience faster international transfers, reduced transaction costs, and access to new investment opportunities through tokenized assets. However, these changes will be implemented gradually through financial institutions rather than directly to consumers.