SWIFT Unveils New Infrastructure to Streamline Tokenized Asset Transfers

• Swift has revealed plans to support the settlement of digital asset transactions via its global interbank messaging service.
• It’s also exploring how to enable the settlement of tokenised assets, which would also expand to support CBDCs when the major economies eventually launch them.

Digital assets, CBDCs and other forms of tokenised currencies have long been touted to be the end for Swift, the global interbank messaging service that the world has relied on for five decades to transfer value between borders. However, Swift has been working on repositioning itself to avoid its demise, and this week, it unveiled new infrastructure to support the transfer and settlement of crypto, tokenised assets and CBDCs.

In its announcement, Swift said that its new infrastructure would enable its members to “transact interchangeably with regulated digital assets and currencies on the Swift network.”

We’re paving the way towards real-world solutions that will enable our members to transact interchangeably with regulated #DigitalAssets and currencies on the Swift network.

👉 Discover what’s next on this exciting journey: https://t.co/SUwRPAtcdg#DigitalCurrencies #innovation pic.twitter.com/SPn0caIHgJ

— Swift (@swiftcommunity) September 11, 2024

In an accompanying blog post, Swift said it’s out to solve the challenge of emerging private islands created by divergent technologies and regulatory environments. These digital islands disproportionately affect institutional investors who are unable to scale their operations while dealing with multiple tokenization platforms. This challenge will also become a major impediment to the rise of CBDCs as each country will operate its own digital currency on its technology.

Can Swift Survive in a Digital Asset World?

Swift’s new infrastructure will enable interoperability for CBDCs, crypto and other emerging tokenised assets, allowing global banks to transact interchangeably between all these assets.

The platform, which boasts over 11,000 global banks as members, intends to enable “multi-ledger Delivery-versus-Payment (DvP) and Payment-versus-Payment (PvP).”

In the future, this could enable securities buyers to simultaneously pay for and exchange tokenised assets in real time on our network.

Delivery vs payment (DvP) is a type of securities settlement where the cash payment is made before or simultaneously with the delivery of the security. The aim is to reduce the risk of payment defaults, which in the securities market can be very costly.

Swift intends to solve this by allowing the settlement of tokenized assets and the corresponding payment.

“The payment leg will initially be made using existing fiat currencies, but will later be able to use tokenised forms of money, such as CBDCs, tokenised commercial bank money, or regulated stablecoins,” the platform says.

While this would be a landmark achievement for Swift and its members, the platform is playing catchup to blockchain. Already, blockchain offers risk-free DvP through smart contracts that automatically execute once conditions are met—in such cases, the conditions are the payment, which triggers the delivery of the security.

Essentially, what Swift is offering is a centralised solution that blockchain platforms already offer. But this is nothing new as legacy finance has been working overtime to offer the same things blockchain offers, but in a centralised manner that maintains its position as the intermediary to global finance.