Swift, the global financial messaging provider, announced on Thursday that it will begin trialing transactions involving digital currencies and assets on its secure network starting in 2025. This marks a notable step toward the gradual integration of digital assets into the broader financial system.
Headquartered in Belgium, Swift is a member-owned cooperative that connects over 11,500 banks, securities organisations, and corporations across more than 200 countries, enabling the secure exchange of standardised financial messages. Although Swift does not hold or manage funds, its network allows financial institutions to communicate, facilitating global and local financial transactions. This initiative aims to demonstrate how Swift can support the movement of diverse types of value — whether digital or traditional — across over four billion accounts in 200 countries and territories.
Bridging digital and traditional currencies
The pilot programme will involve central and commercial banks, exploring how Swift’s existing infrastructure can facilitate transactions of Central Bank Digital Currencies (CBDCs) and other digital assets alongside traditional money. Initial use cases will include payments, foreign exchange (FX), securities, and trade-related transactions. A particular focus will be on enabling Delivery-versus-Payment (DvP) and Payment-versus-Payment (PvP) transactions across different digital ledgers.
In the release, Tom Zschach, Swift’s chief innovation officer, emphasised the need for digital assets and currencies to coexist with traditional money. “With Swift’s vast global reach, we are uniquely positioned to bridge both emerging and established forms of value,” Zschach stated. “As new forms of value emerge, our intention is to continue offering our community the ability to seamlessly make and track transactions of all kinds of assets.”
Role of CBDCs in tokenised assets
Tokenisation, the process of converting traditional assets such as bonds into digital units or blockchain-based tokens, has been explored by banks and asset managers for several years. The hope is that tokenised assets will make trading more efficient, reducing costs and removing intermediaries. Despite these ambitions, tokenisation has yet to gain significant traction in mainstream markets. The tokenised asset market is projected to reach $16 trillion by 2030, the company said.
CBDCs, digital versions of a country’s official fiat currency, are also being trialled worldwide. According to recent data, around 90 per cent of the world’s central banks are currently experimenting with CBDCs. These digital currencies aim to support the trading of tokenised assets and are a response to technological advances that have led to the rise of cryptocurrencies such as Bitcoin.
SWIFT, a key player in the global financial system, has been actively involved in trials of both CBDCs and tokenised assets. In March, it announced plans to launch a platform that would connect developing CBDCs to the traditional financial system, ensuring a seamless transition between digital and traditional forms of money.
First Published: Oct 04 2024 | 11:37 AM IST
