Through an illustrative trial of a hybrid model for interoperability between TradFi systems and DLT networks, Citi and Swift have showcased the feasibility of settling payments between both fiat and digital currencies, in a Payment-versus-Payment (PvP) workflow.
The achievement was enabled through the leverage of existing Swift infrastructure, augmented with institutional-grade blockchain connectors, orchestrators, and smart contracts.
The initiative between Citi and Swift has been designed in an attempt to address the shortcomings of FX messaging standards, such as MT30X, in their inability to instruct synchronised settlement between fiat and digital currencies.
The collaborative, holistic messaging standard is designed to account for distinct data fields and characteristics inherent in fiat-digital currency transactions, in addition to tracking the end-to-end process — from trade initiation to settlement confirmation.
Furthermore, the solution incorporates an escrow mechanism in a bid to overcome irreversible blockchain transactions, while ensuring PvP settlement, and eliminating the settlement risk of both parties.
Ayesa Latif, head of FX products at Citi, believes the “trials with Swift represent a significant leap forward in understanding and developing infrastructure required to support digital currency transactions”.
Head of strategy at Swift, Jonathan Ehrenfeld, adds that the collaboration with Citi “proves that we can leverage the reach of our existing network while introducing advanced capabilities required to orchestrate fiat-digital currency PvP”.
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