SWIFT, the backbone of the global financial messaging system, is taking a step toward becoming a full-fledged blockchain infrastructure provider.
This week, the network unveiled plans to build a shared ledger platform that will allow banks to settle transactions involving stablecoins and tokenized assets across multiple blockchains.
While SWIFT has long served as a messaging layer for cross-border money movements, the new platform would bring it closer to the center of value transfer.
That’s a big shift for a more than 50-year-old traditional financial organization known for handling communications between more than 11,500 banks, not the money itself.
The changing role of SWIFT
“The big development is SWIFT’s changing business model to cope with blockchain disintermediation,” said Noelle Acheson, author of the book. Crypto is now macro newsletter. “SWIFT today doesn’t transfer value; it sends messages. Onchain, the message and the transfer are the same.
Acheson argued that the new platform could act as a ‘linking layer’ for digital currencies and tokenized assets, bridging otherwise siled systems. However, she wondered whether SWIFT is still essential in a world of programmable money.
“Is SWIFT necessary in a tokenized financial system? No, it is not, but it does have connections to virtually all global banks,” she said.
Introducing banks to stablecoins
These connections could give SWIFT an edge as banks look for a path into the blockchain economy.
“The sector is developing at a rapid pace and stablecoins are being adopted globally at such a rapid pace that traditional banks are having to take notice,” said Barry O’Sullivan, Director of Banking and Payments at OpenPayd.
SWIFT said more than 30 financial institutions are already involved in the project. O’Sullivan expects more to follow as demand and regulatory clarity increase. “Adoption, interoperability and regulatory alignment will take time,” he said. “However, SWIFT is clearly positioning itself to play a meaningful role in shaping the evolving stablecoin and tokenized asset ecosystem.”
SWIFT’s platform could also “materially reduce” technical barriers and integration costs for financial institutions looking to embed stablecoins into their operations, said David Duong, head of institutional research at Coinbase.
O’Sullivan noted that the platform could bring “some standardization to the global stablecoin ecosystem,” although fragmentation is likely to remain. “Existing private stablecoins, CBDCs and regional solutions can continue to operate in parallel,” he said.
Years in the making
Duong described SWIFT’s initiative as a “watershed moment” for both crypto and traditional finance, but recalled that it was years in the making. The company has been experimenting with distributed ledger technology since 2017, Duong said, including conducting pilot projects with Chainlink, tokenized securities platforms Clearstream and SETL, and interoperability testing with CBDCs. Developing its own shared ledger platform appears to be the next phase in that long-term transition, Duong said.
However, not everyone will see SWIFT as a neutral player. Its role in enforcing sanctions has led to distrust in countries where banks were cut off from the network, Acheson said.
“It is not clear that the offer would stop the fragmentation of the payment system, given the global mistrust surrounding SWIFT’s role in enforcing US and European sanctions,” she argued.
Yet SWIFT’s decision underlines that the boundaries between traditional finance and blockchain finance are becoming increasingly intertwined and that the world’s largest financial institutions are – slowly and then suddenly – taking initiative to stay relevant.