SWIFT, which as a provider of global communication services offers a standard for the exchange of information on financial transactions, works to always be up-to-date. And therefore the Society for Worldwide Interbank Financial Telecommunication cannot avoid dealing with blockchain, cryptocurrencies & Co.
• Blockchain pilot project with fintech and securities players
• Solve results from experiments “Challenge of interoperability in cross-border transactions”
• New features are planned to become active on the SWIFT network in November
According to the Bundesbank, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT for short, is “a provider of global communication services for the exchange of information about financial transactions in a standardized form”. The cooperative under Belgian law is based in Belgium and is fully owned by its members – banks and other financial institutions. As the company provides “a network focused on extremely high security and availability,” SWIFT is “used by a large number of financial market infrastructures worldwide,” according to the Bundesbank. SWIFT is only responsible for the transmission of messages, while other services such as clearing or processing “via payment systems or correspondent accounts maintained for each other by the financial institutions involved”.
According to SWIFT, it is constantly working to keep its “existing standards up to date in order to adapt the standards to business changes and to resolve technical issues”. Therefore, the provider of worldwide communication services publishes from time to time newly developed standards.
Blockchain pilot project
In September 2022, SWIFT announced in a press release a new pilot project to increase efficiency in communicating key corporate events in collaboration with the fintech symbiont and seven securities players – including American Century Investments, Citi, Vanguard and Northern Trust.
“By bringing together Symbiont’s Assembly and Smart Contracts with SWIFT’s extensive network, we are able to automatically harmonize data from multiple sources into a business action,” said Tom Zschach, Chief Innovation Officer at SWIFT. “This can lead to significant efficiency gains. Business transaction data from SWIFT messages is translated by the SWIFT translator and uploaded to Symbiont’s blockchain. Their smart contract technology can then compare the information exchanged between participants and identify any discrepancies, inconsistencies or flag discrepancies between administrators.”
Advances in CBDCs and Tokenized Assets
Alongside this, results from two separate experiments, according to SWIFT, “solve the significant challenge of interoperability in cross-border transactions by bridging different distributed ledger technology (DLT) networks and existing payment systems so that digital currencies and assets can run smoothly with their traditional counterparts flow and interact with them.” This means that “as CBDCs and tokens evolve, they can be rapidly deployed at scale to facilitate trade and investment between more than 200 countries and territories around the world,” SWIFT said in a press release last October .
Changes in the form of digital assets and currencies
Following these successes, the global communications services provider plans to implement crypto and blockchain features this year. As SWIFT writes in its Standards Release 2023, as part of Standards Release 2022, “the securities reports (category 5) have been extended to allow for the identification of digital assets and new token-related features have been added, including the addition of a 30-digit precision number to allow for the granularity needed for fractionation and the ability to use a wallet blockchain address instead of a custodial account.”
As part of the 2023 version of the standards, the requirement for the presence of a blockchain address or a wallet account number for the use of digital token amounts will now be relaxed. This means that a normal depository can also be used to store digital assets. The Securities Market Practice Group (SMPG) is working on a market practice for how Category 5 notifications are used for digital assets.
As part of the 2022 Release standard, support has also been provided in FX Messages (Category 3) for the confirmation and settlement of undeliverable FX trades and options in digital currencies that do not have an ISO 4217 currency code. The format of this digital asset identification field will be changed to conform to the ISO 24165 – Digital Token Identification (DTI) standard, which includes an additional check character in addition to the 8-digit DTI code.
These changes will become active on 19 November 2023 on the SWIFT network, along with other innovations.
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