The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has announced a successful integration with Chainlink (LINK). The international entity has been experimenting with blockchain technology on both private and public networks, and has finally revealed the progress of its efforts.
Will Chainlink Improve International Payment Rails?
According to an official statement, SWIFT claims its infrastructure can be “seamlessly” integrated with blockchain technology, enabling users to transfer “tokenized value” across multiple networks. In this way, the international monetary system aims to reduce the friction created by these transfers and allow the market for tokenized assets to “scale globally.”
Tokenized assets are “real-world” assets, such as stocks, property or commodities, whose value is tied to a digital asset. This process is designed to allow users to easily conduct transactions without the need for third-party intermediary transactions or third-party verification of the value of the underlying asset.
In theory, the market for tokenized assets has the potential to be worth trillions of dollars, but adoption has been relatively slow compared to cryptocurrencies. As mentioned earlier, the collaboration between SWIFT and Chainlink (LINK) aims to change this trend.
According to data from a poll conducted by the financial institution, more than 97 percent of institutional investors believe that the tokenization of real-world assets has the potential to “revolutionize asset management and become a positive force in the industry.”
However, these institutional investors claim that blockchain-based projects must address interoperability issues in order to realize this potential. The financial institution explained its Chainlink experiment as follows:
These experiments are part of Swift’s broader strategy to ensure safe global interoperability as new technologies and platforms emerge. Building on work over the past few years, they show how Swift infrastructure can support the financial community in interconnecting central bank digital currencies (CBDCs) and other digital assets with new and existing payment systems.
BNY Mellon, City Bank and others connect to Ethereum
Further details provided by SWIFT reveal that major financial institutions around the world are involved in these experiments. Banks such as BNY Mellon, Citi, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX)
Additionally, SWIFT revealed that Chainlink is part of an experiment to create an “enterprise abstraction layer” to connect international payment rails with the ethereum blockchain. Participants leverage Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to connect the two networks.
The financial institution added:
These experiments look at the design and technical development of solutions, as well as considerations around data privacy and governance, operational risk, and legal liability (…). Swift will continue to work with the financial community to understand the most specific use cases for tokenized asset adoption and prioritize its work accordingly. The most high-profile near-term use cases are expected to be secondary trading and private placement markets for unlisted assets.
As of writing, LINK is trading at $5.9, having traded sideways for the past few days.
Cover image from Unsplash, chart from Tradingview