Banks Set To Use Swift For Token Transactions Starting In 2025

(Bloomberg) -- Commercial and central banks will be able to conduct live trials of digital-asset transactions on the Swift messaging network starting next year, nudging widespread institutional adoption of blockchain technology closer to reality.

The organization behind the global Swift network will allow lenders to move real money and assets in trial transactions between different blockchain ledgers, it said in a statement on Thursday, after previously experimenting with such transactions solely in test environments. 

The change will link up the various platforms on which both central and private banks have been experimenting with blockchain technology, said Nick Kerigan, Swift's head of innovation. 

“What we don't want to see is the emergence of what we call ‘digital islands' appearing,” Kerigan said in an interview. “We've tried to help the industry figure out a way to ensure that wherever a digital asset or a digital currency is created, and whatever technology that's created on, that those can successfully work together with each other and the existing financial system.”

Banks like JPMorgan Chase and Citigroup have been building out their own blockchain capabilities for several years, leading to a fragmentation in technology in which different lenders' networks aren't easily interoperable. Meanwhile, usage of blockchain networks to tokenize assets, such as customer deposits and bonds, is steadily growing. The total value of tokenized assets globally is expected to reach $30 trillion by 2034, according to research in June by Standard Chartered.

Overseen by representatives from central banks around the world, Swift is a global network that delivers secure messages between more than 11,000 financial institutions in over 200 countries, directing trillions of dollars in transactions. Millions of messages are sent over the network every day, detailing information like order numbers and confirmations for payments that make it possible for money to flow between different lenders.

Swift began experimenting with blockchain-based transactions as a way of supporting central bank digital currencies in 2021, conducting a series of trials and pilot programs with banks and other institutions under a test environment known as a sandbox. This step will be the first time that Swift has conducted trials of digital-asset transactions directly on its live network.

Trials will cover both payments and securities settlement, Kerigan said, declining to name the banks already lined up to participate. Previous participants in Swift's blockchain experiments have included Deutsche Bank, HSBC, NatWest Group, Santander, Sumitomo Mitsui Banking Corp. and Shanghai Commercial & Savings Bank.

As a network, the value of Swift depends on the number of banks that use it. Digital currencies and their underlying blockchain technology have been touted as a threat to Swift for several years, particularly if banks were to transition to using only their own ledgers for communication.

“We're a global cooperative, so we are as useful as the financial community finds us useful,” Kerigan said. “As we see the greater adoption of blockchain by the financial community, particularly in the digital assets and digital currency space, then it's incumbent on us to also be able to incorporate those technologies — and platforms based on those technologies — into our ecosystem.”