Banks are preparing to pilot crypto transactions on the Swift network as the industry’s transition to tokenization accelerates. Financial institutions will soon use Swift’s platform to settle “digital assets and currencies,” with pilots starting next year.
Swift (World Interbank Financial Telecommunications Association) was founded in 1973 and provides a messaging network for initiating international payments.
More than 11,000 institutions connect to the network, and Swift transmits more than 5 billion financial messages each year.
“For digital assets and currencies to succeed on a global scale, it is important that they can coexist seamlessly with traditional forms of money,” Swift Chief Innovation Officer Tom Schach said in a statement.
This isn’t Swift’s first experiment in this area.
In 2022, the organization claimed to have successfully demonstrated that central bank digital currencies (CBDCs) and tokenized assets can move seamlessly on existing financial rails. The company added that familiarity, along with infrastructure, is an important aspect when establishing a global CBDC system.
And last year, Swift attempted to link private and public blockchains in a joint trial with Chainlink and financial giants such as BNP Paribas and BNY Mellon, a test that was ultimately deemed a success.
Read more: Swift details findings from Chainlink’s cross-chain interoperability testing
Swift is also working on other initiatives related to tokenized assets, which Standard Chartered says could reach $30 trillion by 2034.
The company is participating in Project Agora, an initiative of the Bank for International Settlements, which is exploring ways tokenization can power large-scale cross-border payments.
Swift is also looking at how its “interlinking capabilities” could integrate the U.S. regulated payments network with, for example, the traditional financial system. Visa and Mastercard announced in May that they would work with banks such as JPMorgan and Citigroup to test the network.
Colin Butler, Polygon’s global head of institutional investment, previously told Blockworks that these companies moving closer to aligning with the standards represents the “five-yard line for large-scale institutional adoption.” Ta.
Swift’s announcement came on the same day that Visa created the platform to help financial institutions issue fiat-backed tokens and test their use cases.
Spain-based BBVA has been operating within the Visa Tokenized Asset Platform (VTAP) sandbox this year and plans to begin piloting it on the Ethereum blockchain for selected customers in 2025.
A revised version of this article first appeared in the daily Forward Guidance newsletter. Subscribe here so you don’t miss tomorrow’s issue.
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