SWIFT to Trial Live Digital Currency Transactions in 2024
In a major development for the financial industry, SWIFT, the global bank messaging network, has announced that it will begin trialing live transactions of tokenized assets and digital currencies next year. This initiative is the latest effort to bring digital assets into the mainstream financial system, a process that has been relatively slow-moving so far.
What Are Tokenized Assets?
Tokenized assets refer to traditional financial instruments, like bonds, that are represented as digital units, typically on blockchain platforms. The goal of tokenizing assets is to make transactions faster, cheaper, and more efficient by eliminating intermediaries. Although this concept has been explored by banks and asset managers for several years, it has yet to gain widespread traction in the market.
The Role of Central Bank Digital Currencies (CBDCs)
Around 90% of the world’s central banks are currently testing central bank digital currencies (CBDCs), digital representations of fiat money. These CBDCs are expected to facilitate the trading of tokenized assets, allowing central banks to keep pace with technological advancements such as cryptocurrencies like Bitcoin.
SWIFT has been heavily involved in trials of both tokenized assets and CBDCs. Earlier this year, it announced a new platform designed to connect CBDCs to the existing financial infrastructure.
Moving from Trials to Live Transactions
According to Nick Kerigan, SWIFT’s head of innovation, industry demand is pushing the next phase of development: the execution of live transactions using digital assets. “Now we see industry demand to move out of that trial phase and see a digital asset really move, and have a counterparty pay them in real money against that,” Kerigan said. He also emphasized that both the asset and payment sides of the transaction must be tokenized for the system to work effectively.
Fragmentation Holding Back Adoption
Despite the large potential of tokenized assets and digital currencies, market fragmentation has been a significant barrier to their widespread adoption. Currently, most initiatives remain within banks’ internal systems and have not progressed into broader financial networks. Similarly, central banks testing wholesale CBDCs for cross-border payments are still operating in small, isolated groups.
The upcoming SWIFT trial will involve different types of digital assets across various platforms, which could be a step toward solving these issues of fragmentation.
A Look to the Future
With SWIFT’s involvement and the ongoing development of CBDCs, the landscape for digital assets and tokenized trading may soon change. The move from trial phases to live transactions could mark the beginning of a new era for the financial sector, where digital and tokenized assets play a central role.
SWIFT’s trial, expected to launch next year, will be closely watched as the financial world seeks to understand the potential of digital currencies in improving transaction efficiency, security, and transparency.
