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Swift is developing a blockchain-based ledger to enable real-time, 24/7 cross-border payments, with Ethereum ecosystem developer Consensys building the initial prototype.
The solution is part of an effort to enable cross-border payments at “unprecedented scale,” the Society for Worldwide Interbank Financial Telecommunication, or Swift, said in press release.
“We are paving the way for financial institutions to take the payments experience to the next level with Swift’s proven and trusted platform at the centre of the industry’s digital transformation,” said CEO Javier Pérez-Tasso.
The system will have “parallel tracks of innovation to upgrade the experience over existing ‘fiat’ rails, as well as to ready the industry for digital finance,” he said.
The company expects the ledger, a secure, real-time log of transactions between financial institutions, will record, sequence and validate transactions and enforce rules through smart contracts, the firm said.
Consensys has been tasked with developing the conceptual prototype of the blockchain-powered settlement layer. The company is well-known for developing the popular Web3 wallet MetaMask, as well as several other products within the Ethereum ecosystem.
Along with Consensys, Financial institutions from 16 countries are also providing Swift (which stands for Society for Worldwide Interbank Financial Telecommunication) with feedback on the design of the system, according to the press release.
They include Bank of America, BNY, Deutsche Bank, JP Morgan Chase, Standard Chartered, and Wells Fargo.
Swift does not actually move money, but acts more as a messaging layer between banks across the globe. This is meant to reduce errors and fraud risk.
With over 11,500 institutions from over 200 countries plugged into its interbank messaging system, exclusion the Swift system can effectively cut a country or bank from the global financial system.
A report from the US Federal Reserve Bank of New York highlighted SWIF’s power, and said “sanctions that limit access to this network have become particularly costly for sanctioned entities.”
With its blockchain solution, Swift now seeks to expand its influence to the distributed ledger ecosystem.
The latest announcement of a blockchain-powered solution follows a report from last week that Swift had started testing on-chain payments and messaging using Ethereum’s layer-2 network Linea.
The report also said that Swift was considering launching its own stablecoin, but did not specify which network the product would be deployed on.
Swift has also not mentioned which blockchain the new settlement layer will be built on. However, the involvement of Consensys suggests it may be Ethereum.
Ethereum is currently the leading blockchain network in terms of Total Value Locked (TVL) in the market. Data from DefiLlama shows that $87.47 billion is locked on the Ethereum blockchain, which equates to around 68.02% of the value across the different networks in the market.
Swift’s blockchain collaboration with Consensys is not the company’s first move into distributed ledger technology.
In March last year, the company recognized the value of tokenization and the blockchain model. However, Swift argued that these shared ledgers are not “well-suited to carrying and storing high volumes of data” because of the way data is synchronized across nodes. This is why it believes that it can provide a messaging layer for a blockchain-based financial system.
Later that same year, in November, Swift also provided its global financial messaging network to integrate tokenized fund processes with existing fiat payment systems. The initiative was carried out with the help of UBS Asset Management and the blockchain oracle network Chainlink.
Read more on InsideBitcoins.com
