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As the core hub of the global cross-border payment system, Swift (Society for Worldwide Interbank Financial Telecommunication) has long been ensuring the smooth operation of global financial transactions through standardized payment protocols and centralized supervision. Today, Swift is moving into the field of digital asset trading through the deep integration of blockchain and Web3 technology, exploring the transformation of the future global payment system. This experiment not only aims to optimize the efficiency of the existing payment system, but also heralds the deep intersection of traditional financial institutions and blockchain technology, and its potential impact far exceeds payment innovation. This article will conduct an in-depth discussion of the Swift digital asset trading experiment from multiple perspectives such as technology, market, compliance, risk management, and competitive landscape, analyzing the driving force behind it, future prospects, and its far-reaching impact on the global financial ecosystem.
1. Technological innovation: from traditional cross-border payments to blockchain interoperability
1. The pain points of traditional payment and the disruptive nature of blockchain
Traditional cross-border payment processes face problems such as slow speed, high fees, and lack of transparency. Swift covers more than 11,500 financial institutions, but its payment processing time still takes several days, especially in small-amount high-frequency transactions, which is costly and inefficient. In contrast, blockchain technology greatly shortens payment time and improves transaction transparency through decentralized ledgers and smart contracts. For example, Ripple can complete cross-border payments in a few seconds, while traditional Swift payments take 1 to 3 days.
Traditional payment + blockchain technology
Swift integrates blockchain technology through experiments and uses distributed ledgers to optimize payment paths. By working with Chainlink, Swift uses the Cross-Chain Interoperability Protocol (CCIP) to achieve seamless connections between different blockchains, break down information silos, improve payment efficiency, and build a more flexible global payment network.
Historical testing
On August 31, 2023, Swift has conducted a blockchain payment transfer experiment in a test environment, successfully demonstrating that its infrastructure can facilitate tokenized value transfers across multiple public and private blockchains. This experiment solves the interoperability problem when tokenized assets are managed on different blockchains.
Swift has released the results of a series of new experiments showing that its infrastructure can seamlessly facilitate the transfer of tokenized value across multiple public and private blockchains. These findings have the potential to remove significant friction that has hindered the growth of tokenized asset markets and enable them to scale globally as they mature.
原文：Swift unlocks potential of tokenisation with successful blockchain experiments
Swift's solution to this challenge is to cooperate with more than a dozen major financial institutions and Chainlink, coordinate the resources of real-world institutions, and use Chainlink to open up channels for on-chain interoperability.
Swift’s partners include:
TradiFi: Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, Bank of New York Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX), and The Depository Trust & Clearing Corporation.
Web3: Chainlink is used as an enterprise abstraction layer to securely connect the Swift network to the Ethereum Sepolia network, while Chainlink’s Cross-Chain Interoperability Protocol (CCIP) enables full interoperability between source and target blockchains.
The results show that Swift has successfully demonstrated that it can provide single-point access to multiple public chains by using the existing Web3 security infrastructure, thereby reducing the operational challenges in experiments and the support RWA development required by investment institutions.
2. Cross-chain interoperability: breaking the blockchain silo effect
The interoperability of blockchain is one of the main bottlenecks that currently hinder its large-scale application. Each public chain has an independent architecture and consensus mechanism, which makes the transfer of assets between chains extremely challenging. Swift has explored how to achieve liquidity management between multiple blockchains by collaborating with Chainlink and using its cross-chain interoperability protocol.
Swift’s experiment not only solves the liquidity problem of assets between different public chains, but also further enhances the flexibility of its network, enabling financial institutions to explore multi-chain management of digital assets without giving up security and regulation. This lays a technical foundation for more complex financial application scenarios in the future (such as cross-border tokenized asset transactions, real-time settlement, etc.).
Once this cross-chain interoperability matures, global financial institutions will be able to transfer assets more freely between different blockchain networks, promoting the large-scale application of digital currencies and tokenized assets in the global market. In the long run, this will further reduce the operating costs of financial institutions and improve the global liquidity of assets.
2. Market Expansion: The Future of Tokenized Assets and Digital Currency
1. The rise of tokenized assets and their impact on global markets
Tokenized assets refer to the digitization of real-world assets (such as real estate, bonds, stocks, artworks, etc.) and their management and trading on the blockchain. According to market analysis, the global tokenized asset market size may reach 30 trillion US dollars by 2030. The asset liquidity, transparency and efficiency improvements brought by tokenization will have a profound impact on the global financial market.
One of Swift's experimental goals is to provide platform support for the cross-border flow of tokenized assets through its existing global network. Through the combination of on-chain and off-chain, Swift can not only simplify the transaction process of asset tokenization, but also provide a standardized financial infrastructure to ensure that different asset types can flow freely around the world. This architecture not only serves current digital assets, but also prepares for more complex and diverse financial products in the future.
Once successfully promoted, Swift's experiment will completely change the way financial institutions manage and trade assets. More high-value assets will be tokenized, global investors' investment portfolios will be more flexible and diverse, and cross-border investment barriers will be broken, which will greatly promote the deepening and expansion of the global capital market.
2. Integration of digital currency and CBDC
Many countries around the world are actively researching and developing central bank digital currencies (CBDCs). For example, China's digital RMB has entered the pilot stage, and Singapore, the European Union, and others are also exploring its possibilities. CBDC aims to redefine the global payment and monetary system by reducing intermediaries, lowering payment costs, and increasing transaction transparency.
Schematic diagram of the digital currency research stages of central banks around the world Source: World Economic Forum @10xWolfDAO
Swift has demonstrated its technical capabilities to integrate digital currencies (including CBDC) through experiments. Its global payment network combined with blockchain interoperability technology provides a standardized global digital currency trading platform that enables central banks to interoperate seamlessly. This provides technical support for the interconnection of global monetary policies and simplifies cross-border payment and settlement processes.
Swift's CBDC support will become a key link in the global digital currency ecosystem. In the future, central banks can achieve cross-border flows of CBDC through Swift's global network, promoting the modernization and digitalization of the global monetary system. For financial institutions, this will greatly simplify cross-border payment and settlement processes, while providing a compliant and secure channel for digital currency transactions.
3. Risk Management: Security and Market Stability of Digital Assets
1. Risk Control of Tokenized Assets
The rapid expansion of tokenized assets is accompanied by increased market volatility and operational risks, especially in the cross-chain flow and management of assets. Swift’s experiments not only focus on payment efficiency, but also explore how to improve the security and transparency of digital assets through technical means.
Through cooperation with Chainlink, Swift uses a decentralized price feed mechanism and the immutability of blockchain to ensure that tokenized assets are highly transparent and secure during the transfer process between different chains. At the same time, Swift's global network provides off-chain security support, allowing financial institutions to trade digital assets with controllable risks.
If Swift's experiment can effectively solve the risk issues of tokenized assets, it will greatly enhance the trust of financial institutions in tokenized assets. This will not only help promote widespread application in the global market, but also provide a reference for global financial regulators and lay the foundation for the formulation of more sophisticated digital asset management rules in the future.
2. Market volatility and financial stability
The high volatility and lack of regulation in the blockchain market are among the biggest concerns of traditional financial institutions. Swift’s experiment is not only aimed at improving transaction efficiency, but also testing how to reduce the impact of market volatility on financial stability through the robustness of its global payment network.
Swift provides a buffering mechanism against market fluctuations by building an interoperability framework between on-chain technology and off-chain financial infrastructure, ensuring that transactions remain safe and stable in times of instability. Once the experiment proves its effectiveness, more financial institutions will have the confidence to enter the digital asset market, which will significantly enhance market liquidity and promote the digital transformation of global capital markets.
IV. Regulation and Compliance: Challenges of Cross-Border Digital Assets
1. Divergence and unification of global regulatory frameworks
Globally, regulatory frameworks regarding digital assets vary significantly. The United States has strict regulatory measures on cryptocurrencies, while places such as Singapore and Europe are relatively open to blockchain and digital assets. As the core hub of global payments, Swift must find a balance in this changing regulatory environment.
Swift's experiment demonstrates its exploration of compliance in digital asset transactions in different regulatory environments. By working with multiple financial institutions around the world, Swift is able to test the compliance of its technical solutions in various jurisdictions. This provides a feasible reference for future cross-border payments and transactions of digital assets, and helps promote the gradual unification of the global regulatory framework.
The success of Swift's experiment will provide valuable experience for global regulators and promote the standardized development of the digital asset market. Digital asset transactions in the global financial market will be able to be carried out under a clearer regulatory framework, which will greatly reduce compliance risks and promote the widespread application of digital assets.
2. Compliance requirements of central banks and financial institutions
As more and more central banks and large financial institutions participate in the development and trading of digital assets and CBDCs, compliance will become a core factor in determining their large-scale application. Through this experiment, Swift demonstrated its ability to solve compliance issues and provided a template for global financial institutions to conduct compliance operations in the field of digital assets.
As a long-term trusted payment infrastructure provider for global financial institutions, Swift has accumulated rich experience in the field of regulatory compliance. By combining blockchain technology with its global network, Swift provides an operational framework for compliance management of digital asset transactions and CBDC. In the future, this will help global financial institutions meet the strict compliance requirements of various countries when participating in the digital asset market.
Swift's compliance experiment provides a solid foundation for the large-scale application of digital assets in the future. Global central banks and financial institutions will be able to use Swift's global network to safely participate in digital asset transactions and cross-border payments while ensuring compliance.
5. Competition and Strategy: Reshaping the Payment Market
1. Competition between FinTech and blockchain payment networks
Blockchain payment networks (such as Ripple, Stellar) and fintech companies (such as PayPal, Square) are rapidly emerging and challenging the dominance of traditional payment networks. They are gradually eroding Swift's share in the cross-border payment market through innovative payment solutions and low fees.
Swift's digital asset experiment is a positive response to this competitive pressure. By introducing blockchain technology, Swift not only defends its core position in the global payment network, but also explores innovative models for the future payment market. This experiment is not only a technical adjustment, but also the beginning of a strategic transformation.
The success of Swift's experiment will redefine the competitive landscape of the global payment market. In the future, the payment market will be more diversified, and the competition and cooperation between traditional financial institutions, blockchain companies and fintech companies will accelerate the modernization of the global payment system.
2. Strategic layout of future payment architecture
Swift has demonstrated its technological innovation capabilities through experiments and made strategic arrangements for the future architecture of the payment system. As blockchain technology and the tokenization market expand, Swift will not only be a supplier of global payment networks, but may also become an infrastructure provider for the global digital asset market.
Swift is experimenting with building a future payment architecture that will rely more on blockchain technology and decentralized networks. Through deep integration with traditional financial institutions, Swift not only retains its existing customer base, but also provides more flexible and innovative solutions for the future trading and management of digital assets.
But while Swift brings positive feedback, its limitations cannot be ignored. As the hub of the global financial infrastructure, Swift must strictly comply with international financial regulatory requirements, which makes complete decentralization almost impossible for Swift.
Swift’s Geopolitical Role and Centralized Control
1. Will it be used as an enhanced political monopoly tool?
Swift’s digital asset trading experiment is closely related to the geopolitical background, especially the role of Swift in global sanctions. As the hub of the global payment system, Swift has been used as an important tool for the United States and Western countries to impose foreign economic sanctions in recent years. Countries such as Russia and Iran have been blocked by the Swift system due to geopolitical conflicts, which has led these countries to seek alternatives to deal with sanctions. Russia’s TON chain (The Open Network) is one of the cases. It has developed rapidly and gradually acquired payment and financial services functions.
In this context, Swift’s digital asset experiment can be seen as a response of the traditional financial system to the trend of decentralization. Swift’s digital asset experiment shows how it can prepare for a diversified financial ecosystem that may emerge in the future by integrating digital currency with the legal currency system.
From a geopolitical perspective, the rapid development of decentralized finance has the potential to undermine the effectiveness of Western countries using Swift to impose sanctions. Therefore, Swift’s collaboration with Web3 technology may not only be aimed at improving transaction efficiency and technological innovation, but may also be responding to changes in geopolitics and the balance of global financial power.
2. Does it reflect a political tendency to relax restrictions on crypto assets?
Swift's experiment does not necessarily mean that the mainstream financial system will relax its regulation of crypto assets. On the contrary, it may be more like traditional financial institutions exploring how to take advantage of the efficiency and security advantages brought by blockchain technology within a compliant framework. By incorporating digital asset transactions into its global payment network, Swift is actually paving the way for the legalization and compliance of crypto assets, rather than letting crypto assets develop freely. Therefore, this approach is more like an attempt to regulate the management of crypto assets rather than a signal of a comprehensive political relaxation of restrictions on crypto assets.
In the current geopolitical context, Swift may be more concerned about how to ensure the security and traceability of financial transactions on a global scale. Therefore, Swift's experiment reflects its cautious acceptance and integration of crypto assets, rather than relaxing the regulation of cryptocurrencies or establishing close ties with them. This means that Swift's digital asset experiment is more likely to be an exploration of the future direction of digital finance, especially how to make full use of the advantages of decentralized technology within the framework of compliance and regulation.
3. Future global payment landscape: Integration of mainstream financial system and blockchain
Swift’s experiment does not completely remove its role as an intermediary. It does not adopt a completely decentralized consensus mechanism like Bitcoin or Ethereum, but enhances the flexibility and operability of centralized networks through blockchain technology. Although Swift may allow digital assets to be traded in its network, it still maintains centralized control over network participants and transaction processes.
Swift's experiment reflects that traditional financial institutions are gradually aware of the potential of blockchain technology and encrypted assets in future global finance, but they have not relaxed their control over them. On the contrary, Swift is ensuring that encrypted assets are integrated into the existing system within a compliant framework by introducing regulatory frameworks and technological innovations.
Swift's digital asset experiment is more like an exploration of a hybrid model - it introduces the technical advantages of blockchain while retaining the core control and regulatory framework of the traditional financial system. The core purpose of this hybrid model is to ensure regulatory compliance and centralized control while maintaining the efficiency and transparency of the financial system.
This gradual integration may herald a hybrid model for the future global payment landscape that includes both the traditional fiat currency system and digital assets and decentralized finance, but the latter will still need to be strictly regulated and controlled.
The ultimate outcome of this convergence model will depend on the degree of cooperation between global financial institutions, regulators, and technology providers. Swift’s experiment has provided an important guide to this trend, but it is more inclined to control the development of crypto assets rather than relax its restrictions.
7. Impact on the existing encryption market
Swift’s digital asset trading experiment is exploring how to deeply integrate blockchain technology with the global financial network. This move is expected to have a dramatic impact on multiple tracks and specific projects in the crypto market:
1. Cross-border payment track ⬇️
Cross-border payment is one of the important tracks in the crypto market. Many crypto projects provide fast and low-cost cross-border payment services through blockchain technology, and Swift, as the backbone of the global payment network, is bound to have a huge impact when it enters this field.
1.1 Ripple（XRP）
Ripple provides real-time cross-border payment solutions through its XRP Ledger, which has attracted a large number of financial institutions and banks to cooperate. Ripple's core competitive advantage lies in its efficient cross-border payment capabilities and network coverage. However, Swift's digital asset experiment also achieves cross-chain and real-time payment functions by leveraging blockchain technology, which may directly weaken Ripple's market advantage.
Risk of customer churn: As Swift's network integrates blockchain technology, existing Ripple bank customers may be attracted to Swift's global payment network, thereby choosing the more familiar and more compliant Swift system (and as the SEC continues to keep a close eye on Ripple, Swift has a high compliance advantage).
1.2 Stellar（XLM）
Stellar is similar to Ripple in that it focuses on cross-border payments, especially small and medium-value cross-border payments and financial inclusion. Stellar provides fast and cheap payment channels, which attracts some financial institutions and companies in developing countries.
Market share at risk: Swift’s entry could reduce Stellar’s attractiveness in the cross-border payments market, especially as financial institutions may prefer Swift’s blockchain technology for broader global coverage and compliance support.
2. Stablecoin and fiat currency payment track ⬇️
Swift's global payment network is gradually integrating blockchain technology, especially in the integration of tokenized assets and fiat currency payments, the stablecoin and fiat currency payment tracks will be directly impacted.
2.1 USDC and USDT
USDC and USDT are the two most widely used stablecoins in the world, mainly used for cross-border payments, DeFi, and exchange transactions. Their success is mainly due to providing a bridge between fiat currencies and crypto assets.
Compliance competition: Swift has the advantage of a global compliance system. Once its digital asset trading network provides similar functions to stablecoins and is more in line with global regulatory standards, USDC and USDT may lose their appeal to financial institutions, especially when it comes to large cross-border payments (USDT has been working towards compliance, and USDC’s biggest advantage is compliance and institutional endorsement, but compared with Swift, it will obviously be at a disadvantage).
Decreased demand in the stablecoin market: If Swift’s tokenized fiat payment network can seamlessly enable cross-border payments and transactions, financial institutions and large enterprises may reduce their reliance on USDC and USDT, especially when strict regulatory compliance is required.
2.2 Facebook (Meta) Diem
Although Facebook's Diem (formerly Libra) project has been shelved, its concept once attempted to create a global payment network through stablecoins. Swift's digital asset experiment may attract financial institutions and corporate clients who originally planned to use Diem to choose Swift as a more secure and compliant solution.
The market loses competition opportunities: Swift's global influence and compliance network will significantly weaken the competitiveness of similar stablecoin projects such as Diem. Financial institutions are more likely to choose Swift for conversion and payment of fiat currencies and digital assets.
3. Decentralized Finance (DeFi) Track ⬇️
The DeFi track has developed rapidly in recent years, and applications such as decentralized lending, liquidity mining, and decentralized exchanges (DEX) have attracted a large number of users and funds. However, Swift's digital asset trading experiment will have an impact on the DeFi track by providing a compliant blockchain payment and asset management network.
3.1 Aave and Compound (Lending Platform)
Aave and Compound are leading decentralized lending platforms where users can obtain lending services by pledging crypto assets. The appeal of the decentralized lending market lies in its decentralized nature without the need for intermediaries.
Risk of institutional client churn: The compliance and global financial institution connectivity provided by Swift may attract institutional investors who are currently hesitant to enter the DeFi market. These institutions may be more willing to conduct lending operations on Swift's blockchain payment network to ensure compliance with global regulatory requirements.
3.2 Uniswap and SushiSwap (decentralized exchanges)
Decentralized exchanges (DEX) such as Uniswap and SushiSwap rely on liquidity providers to provide users with trading services without intermediaries. The core competitiveness of DEX lies in its openness and decentralized trading mechanism.
Liquidity competition: Swift’s network may divert liquidity from decentralized trading platforms by integrating financial institutions and mainstream investors. Institutional investors may prefer to use a compliant, regulated platform to trade assets rather than a decentralized exchange.
Increased technical and compliance pressure: As the Swift network attracts more compliant trading flows, DEXs may face greater compliance and technical pressure. Decentralized platforms will have to find a balance between compliance and innovation to attract and retain users.
4. Tokenized asset track ⬇️
Swift's digital asset trading experiment focuses on the cross-border flow and management of tokenized assets, especially the tokenization of traditional assets (such as real estate, bonds, etc.) and their circulation in the global financial system. Existing tokenized asset platforms will be directly affected by Swift's entry into the market.
4.1 Polymath and Securitize
Platforms such as Polymath and Securitize focus on trading tokenized securities and other assets. These platforms are committed to providing blockchain solutions to help financial institutions digitize traditional assets and manage and trade them on the blockchain.
Compliance competition: Swift’s global payment network provides a more mature and compliant framework, and financial institutions may choose Swift over decentralized platforms for asset tokenization and trading, ensuring that they meet international regulatory standards.
Competition for market share: Due to Swift’s global coverage, its tokenized asset solutions are likely to attract more large institutional clients, which will directly threaten the market share of existing decentralized tokenization platforms.
4.2 RealT and Propy (Real Estate Tokenization Platform)
Platforms such as RealT and Propy focus on real estate tokenization and simplify the real estate transaction process through blockchain technology, playing an important role in cross-border investment in particular.
Risk of cross-border investment loss: Swift’s compliant cross-border investment channel provided by its global payment network and blockchain technology may attract more high-net-worth individuals and institutions, reducing the demand for decentralized platforms. This will lead to market loss for platforms such as RealT and Propy, especially in the field of high-end real estate investment.
Competition for tokenized asset liquidity: Swift’s entry is likely to increase the market liquidity of high-value tokenized assets, which will bring huge competitive pressure to existing decentralized real estate platforms.
5. Cross-chain interoperability track ⬆️
Through cooperation with Chainlink, Swift has achieved cross-chain interoperability between multiple blockchains. Compared with the direct impact and suppression on the above-mentioned tracks, this function may have a relatively positive impact on existing cross-chain platforms.
5.1 Chainlink
Although Chainlink is an important partner in Swift’s cross-chain interoperability technology, as Swift’s experiments mature, Chainlink, as a market leader in decentralized price feeds and cross-chain solutions, may face new challenges.
Shift in technology direction: As Swift gradually integrates cross-chain interoperability capabilities, Chainlink may need to further enhance its technical capabilities or find more application scenarios in the decentralized field to maintain its market leadership.
Market synergy: At the same time, Swift’s experiments may also promote the application and expansion of Chainlink technology in the global financial market, further enhancing Chainlink’s market value.
6. Digital currency track ⬆️
Swift’s digital asset experiments will inevitably affect the digital currency track, especially in the competition between central bank digital currencies (CBDCs) and stablecoins.
6.1 CBDC Project
Central banks around the world are actively developing and piloting central bank digital currencies (CBDCs), including China's digital yuan and Europe's digital euro. If Swift's blockchain payment network can seamlessly integrate CBDCs, it will bring more liquidity and innovation to the global payment system.
Accelerated globalization of CBDC: By integrating central bank digital currencies, Swift may promote the globalization of CBDC, enabling it to enter the mainstream payment system more quickly and weaken the position of decentralized stablecoins in the existing crypto market.
in conclusion
Swift's digital asset trading experiment is not only a technical exploration, but also a core pillar of its future payment strategy. Through the introduction of blockchain technology, Swift has made comprehensive innovations and layouts in payment efficiency, tokenized asset management, market risk control, compliance and global competition. The success of this experiment is expected to significantly improve the efficiency of the global payment system and promote the widespread application of digital currency and tokenized asset markets.
In the future, Swift will continue to play a key role in financial innovation and technological innovation. The results of its experiments will have a profound impact on the global payment network and financial market, and promote the transformation of the global financial ecosystem towards a more efficient, secure and digital direction. However, its inherent centralized nature will not bring complete carnival and embrace to the crypto market. In fact, its outstanding market share and payment attributes will have an important impact and impact on the current crypto landscape.
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Written by: Cage / Mat / Darl /WolfDAO
Proofreader: Punko Editor-in-Chief: Vessel
Special thanks: Thanks to the above partners for their outstanding contributions to this issue.
