Bank messaging network SWIFT has recently shared a report highlighting how SWIFT can connect with blockchains and solve the issue of interoperability between different blockchain networks.
The report, titled “Connecting blockchains: Overcoming fragmentation in tokenised assets,” concludes that a more incremental approach that interlinks existing systems to blockchains is “more plausible” for market development in the near term, compared to bringing together central bank digital currencies (CBDCs), tokenized deposits and assets in a single unified ledger.
Diagram demonstrating how SWIFT can connect financial institutions with various blockchains. Source: SWIFT
SWIFT highlighted in the report that there’s a “lack of secure interoperability” between different blockchain networks. The financial giant said that this leads to various inefficiencies and a poor user experience. However, the financial institution believes that there’s potential for SWIFT to solve the interoperability problem.
In a press release, SWIFT chief innovation officer Tom Zschach said that tokenization can reach its full potential once institutions can connect to the whole financial ecosystem. Zschach explained:
“Our experiments have demonstrated clearly that existing secure and trusted Swift infrastructure can provide that central point of connectivity, removing a huge hurdle in the development of tokenization and unlocking its potential.” Within the report, SWIFT pointed toward many potential benefits of tokenization, which include increased liquidity and automation as well as enhanced transparency and security.
“Our experiments have demonstrated clearly that existing secure and trusted Swift infrastructure can provide that central point of connectivity, removing a huge hurdle in the development of tokenization and unlocking its potential.”
SWIFT’s report provides a valuable overview of the challenges and opportunities associated with blockchain integration. The report’s findings suggest that an incremental approach that interlinks existing systems to blockchains is the most feasible path forward in the near term. However, the report also highlights the need for further development in areas such as interoperability and regulation.