Swift explores blockchain network’s interoperability to address assets tokenization

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In collaboration with major financial institutions and FMIs, Swift is conducting experiments to explore blockchain interoperability and address the challenges of managing and trading tokenized assets. The experiments aim to leverage Swift’s existing infrastructure to enable seamless interoperability across various public and private blockchain networks. Chainlink, a leading Web3 services platform, will provide the necessary connectivity for these experiments.

Tokenized assets have gained interest from institutional investors seeking new forms of value. However, these assets are tracked on disparate blockchain networks that lack interoperability. This fragmentation creates significant overhead and friction in managing and trading assets. Swift recognizes that overcoming this challenge is crucial for the long-term scalability of the market and aligns with its mission to remove friction in international transactions.

SWIFT Blockchain Experiments

The experiments build upon successful trials conducted in 2022 and involve collaboration with more than a dozen financial institutions and FMIs, including ANZ, BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SDX, and DTCC. The goal is to test how these organizations can utilize their Swift infrastructure to facilitate efficient transfers of tokenized value across different blockchain networks.

The adoption of blockchain technology in capital markets has the potential to generate efficiencies, reduce costs, and increase liquidity. However, the lack of interoperability poses a challenge for financial institutions that must interact with multiple blockchain-based networks securely and in a trusted manner. Swift aims to develop an interoperability model that enables global access to different platforms, recognizing that there won’t be a single prevailing blockchain network.

The Experiments and Use Cases

Swift and its partners have embarked on a series of experiments encompassing three key use cases to demonstrate the potential of blockchain interoperability. These use cases showcase the seamless transfer of tokenized assets across different blockchain networks, highlighting the role of Chainlink’s enterprise abstraction layer and Cross-Chain Interoperability Protocol (CCIP) in enabling connectivity and interoperability.

Transferring Tokenized Assets between Wallets on the Same Public Blockchain

In this use case, Swift aims to illustrate the smooth transfer of tokenized assets between wallets operating on the same public blockchain. The experiment takes place on the Ethereum Sepolia testnet, utilizing Swift’s infrastructure as a single access point. Chainlink’s connectivity services bridge the gap between the Swift and Ethereum Sepolia networks, ensuring secure and compliant asset transfers.

Transferring Assets from a Public Blockchain to a Permissioned Blockchain

The second use case explores transferring tokenized assets from a public blockchain, such as Ethereum, to a permissioned blockchain. Swift and its partners aim to showcase the interoperability between these distinct blockchain environments, enabling financial institutions to move assets across different types of networks seamlessly. Chainlink’s CCIP is crucial in facilitating the secure and efficient transfer of assets while maintaining compliance standards.

Transferring Assets between Different Public Blockchains

The final use case focuses on transferring tokenized assets between different public blockchains. It highlights the need for interoperability among various blockchain networks, each with unique functionalities and characteristics. Swift and its partners aim to demonstrate the feasibility of cross-chain asset transfers. Showcasing the potential of a globally connected ecosystem for tokenized assets. Chainlink’s connectivity solutions bridge seamless interactions between these blockchain networks.

By leveraging their existing infrastructure, financial institutions can connect to blockchain ledgers compliant and securely. And in so doing, minimize investment costs and reduce the risk of technology obsolescence. Swift’s global cooperative nature uniquely positions them to address the blockchain interoperability challenge.

The experiments will advance the industry’s understanding of technical and business requirements for interacting with multiple blockchain networks. In addition, they will highlight the value of using a blockchain interoperability protocol for secure data and value transfers. The findings from these experiments will be published later this year. They are expected to contribute to industry-wide progress in harnessing the transformative potential of blockchain technology for asset settlement and management. The experiments are important as they can pave the way for blockchain in banks and other traditional asset transfers.


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Kudzai G Changunda
Kudzai G Changundahttp://www.about.me/kgchangunda
Finance guy with a considerable interest in the adoption of web 3.0 technologies in the financial landscape. Both technology and regulation focused but, of course, people first.
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