SWIFT and Chainlink team up to unlock the future of tokenized assets: Details

TL;DR Breakdown

  • SWIFT successfully conducted experiments demonstrating its ability to facilitate the transfer of tokenized assets across multiple public and private blockchains, aiming to reduce operational challenges and costs for financial institutions.
  • The experiments involved collaboration with major financial institutions and Chainlink, a Web3 services platform. Various transfer scenarios were tested, addressing concerns related to data privacy, governance, operational risk, and legal compliance.
  • The successful tests build on SWIFT’s earlier work with Central Bank Digital Currencies and are expected to accelerate the adoption of tokenized assets, particularly in the secondary trading of non-listed assets and private markets.

Description

The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global financial messaging network, announced results from a series of experiments that demonstrated its capability to facilitate the transfer of tokenized assets across various public and private blockchains.  The experiments aimed to address the fragmentation of tokenized assets, which has been a significant hurdle for investors … Read more

The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global financial messaging network, announced results from a series of experiments that demonstrated its capability to facilitate the transfer of tokenized assets across various public and private blockchains. 

The experiments aimed to address the fragmentation of tokenized assets, which has been a significant hurdle for investors and financial institutions. According to an announcement on August 31, SWIFT’s infrastructure could significantly reduce operational challenges and costs for institutions, accelerating the growth and scalability of tokenized asset markets globally.

Collaboration and technical feasibility

SWIFT collaborated with several major financial institutions, including Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, and Lloyd Banking Group, among others. Chainlink, a leading Web3 services platform, also played a pivotal role in the experiments. Chainlink’s Cross-Chain Interoperability Protocol (CCIP) enabled complete interoperability between the source and destination blockchains. The experiments involved various scenarios, such as transfers within the same public Distributed Ledger Technology (DLT) network, transfers between different public blockchains, and transfers between public and private blockchain networks. These tests addressed critical concerns related to data privacy, governance, operational risk, and legal compliance.

Tokenization has garnered widespread attention, with 97% of institutional investors foreseeing it as a revolutionary force in asset management. Its potential to enhance efficiency, reduce costs, and provide fractional ownership opportunities has been highly optimistic. However, the challenge has been the fragmentation of tokenized assets across different blockchains, each with its own functionality and liquidity profile. SWIFT’s experiments have shown that its existing secure infrastructure can serve as a central point of connectivity, eliminating a critical barrier in the development of tokenization.

The experiments build on SWIFT’s previous work connecting Central Bank Digital Currencies (CBDCs) and digital assets with existing and emerging payment systems. Tom Zschach, Chief Innovation Officer at SWIFT, emphasized that interoperability is crucial for the seamless flow of value across the world, especially in the face of increasing fragmentation in the financial ecosystem.

As SWIFT continues collaborating with the financial community, the most compelling use cases for tokenized asset adoption are anticipated to be in the secondary trading of non-listed assets and private markets. This development marks a pivotal juncture in the trajectory of tokenization, poised to reshape the financial landscape and usher in a new era of industry growth.

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