Summary
- Swift's initiative allows 17 major banks to conduct tokenized deposit transfers over the weekend, but final settlements still depend on outdated, business-hour systems.
- Key participants include significant Global Systemically Important Banks like Citi, HSBC, BNY, and Wells Fargo.
- Despite being designed with Ethereum-compatible technology, the blockchain-based ledger remains mostly centralized.
On Thursday, Swift, the pivotal financial entity linking countless banks worldwide, announced that over a dozen institutions are gearing up to utilize its “blockchain-based ledger.”
The cooperative, which has been a cornerstone of the traditional financial system for many years, anticipates that 17 banks from six continents will take part in a pilot program facilitating the exchange of tokens that symbolize deposits, as detailed in an official announcement.
Notably, the pilot includes several banks recognized by the Financial Stability Board as Global Systemically Important Banks, such as BNP Paribas, BNY, Citi, HSBC, Standard Chartered, UBS, and Wells Fargo.
Although the final settlement of fiat currency still depends on traditional systems during business hours, Swift emphasized that its blockchain-based ledger enables banks to transfer tokenized deposits “overnight and on weekends,” a feature common to all cryptocurrency networks.
“Banks gain from enhanced client experiences and improved global liquidity efficiency without sacrificing compliance, credit, risk, and control standards that are part of existing payment processes,” Swift stated.
This announcement illustrates how traditional financial institutions are integrating blockchain technology in a way that aligns with their existing operations, while also adopting efficiencies that executives on Wall Street have advocated for years.
“We are transforming cross-border payments with Swift’s new blockchain-based ledger—integrating tokenized deposits with our global network to facilitate instant, continuous money movement,” expressed Mahesh Kini, global head of cash management at Standard Chartered.
In a March blog post, Swift indicated that its network is built on architecture compatible with the Ethereum Virtual Machine (EVM), which supports one of the leading permissionless networks in cryptocurrency. However, Swift’s network is predominantly centralized, operating a shared environment for transactions while banks maintain control over their individual assets.
Alternative networks like XRP Ledger (XRPL) were developed to provide a quicker and more cost-effective alternative to Swift’s technology, specifically addressing slow settlement times. Recently, the Canton Network has gained traction among financial firms by balancing compliance with privacy.
Established financial players like JPMorgan have explored blockchain solutions for years, having rebranded its primary solution and tokenization unit to Kinexys from Onyx in 2024. Swift pointed out that its product was developed in a span of nine months.