SWIFT will trial live transactions of tokenized assets and digital currencies in 2025, aiming to integrate blockchain-based tokens into the broader financial system.
SWIFT’s Blockchain Integration Initiative
Global financial messaging network SWIFT will initiate live transactions of tokenized assets and digital currencies in 2025, marking a significant step towards the mainstream adoption of blockchain-based finance. This development was reported on October 3rd, 2023.
The Potential of Tokenized Assets
Banks and asset managers have been exploring the tokenization of assets like bonds, hoping that blockchain technology can streamline trading processes and reduce costs by eliminating intermediaries. Despite these ambitions, the wider market has been slow to adopt these innovations.
SWIFT’s Commitment to Digital Finance
SWIFT has been actively involved in trials of central bank digital currencies (CBDCs) and tokenized assets. The networkβs latest initiative aims to bridge these digital innovations with traditional banking systems. SWIFT asserts that this move is a response to the growing demand within the industry for real-world digital asset transactions.
βTo successfully trade and settle a tokenized bond transaction, you need the cash and thatβs where a tokenized deposit or wholesale CBDC comes in. Itβs not good enough if you just have delivery or just payment, you need both.β
Global Central Banks and Digital Currency Exploration
As 90% of the worldβs central banks explore digital currency options, SWIFTβs new platform, expected to launch within the next one to two years, aims to integrate CBDCs into the financial ecosystem. The organization emphasizes that the successful trading and settlement of tokenized bonds require both tokenized deposits or wholesale CBDCs, ensuring that payment and delivery are equally supported.
Challenges and Considerations
Despite SWIFTβs efforts to integrate digital currencies and tokenized assets, not all countries are eager to develop their digital currencies. There are ongoing concerns about technological and regulatory hurdles. For instance, Swedenβs Riksbank has highlighted the need for extensive technical and regulatory development to ensure secure offline payments with its proposed e-krona.
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