SWIFT will trial live digital currency transactions in 2025
Global banking messaging network SWIFT will test live transactions of tokenized assets and digital currencies next year, it said Thursday, the latest step in the currently slow-moving integration of such assets into the broader financial system.
Banks and asset managers have been busy ‘tokenizing’ traditional assets such as bonds for several years.
They hope that by using digital units – usually blockchain-based tokens that represent part of the underlying asset – trading can be faster, cheaper and more efficient, including by cutting out middlemen involved in many transactions.
However, so far these have failed to gain substantial traction in the wider market.
About 90 percent of the world’s central banks are also testing central bank digital currencies (CBDCs), digital versions of fiat money, which facilitate trading of tokenized assets. Monetary authorities are trying to get on top of the technological advances that have made cryptocurrencies like bitcoin possible.
SWIFT, which plays a crucial role in global banking, has been involved in trials of both CBDCs and tokenized assets. In March, it said it would launch a new platform to connect CBDCs currently under development to the existing financial system.
“Now we’re seeing industry demand to get out of that (pilot) phase and we’re seeing a digital asset really moving, and a counterparty paying them in real money for that,” said Nick Kerigan, SWIFT’s head of innovation .
“That is the phase we will move to next year, albeit in a controlled manner.”
While the potential is great, the fragmented nature of the market holds this back and very few initiatives have emerged outside the banks’ internal systems themselves.
Similarly, central banks are testing wholesale CBDCs for cross-border payments, but within small groups.
The latest SWIFT initiative involves different types of digital assets in combination on different platforms.
“To successfully trade and settle a tokenized bond transaction, you need the money and that’s where a tokenized deposit or wholesale CBDC comes in,” Kerigan said.
“It’s not good enough if you only have delivery or only payment, you need both.”
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
