The Proof-of-Concept will utilize Chainlink’s Cross-Chain Interoperability Protocol (CCIP) while allowing SWIFT messages to instruct token transfers across every blockchain network.
On Wednesday, September 28, the global interbank messaging system SWIFT announced that it is working with oracle services and price feeds provider Chainlink, on a cross-chain interoperability protocol (CCIP) with an initial Proof-of-Concept.
The CCIP will enable SWIFT messages for instructing on-chain token transfers which will allow the interbank network to communicate across all blockchain environments. During the panel discussion in New York, Chainlink co-founder and Sergey Nazarov and SWIFT strategy director Jonathan Ehrenfeld Solé said that the project will help remove the difficulties in bringing together traditional finance and decentralized finance (DeFi). It will also help to boost the adoption of distributed ledger technology (DLT) blockchains.
SWIFT is using the Cross-Chain Interoperability Protocol (CCIP) in an initial proof of concept.
CCIP will enable SWIFT messages to instruct on-chain token transfers, helping the SWIFT network become interoperable across all blockchain environments.https://t.co/8GOBNhzwCk pic.twitter.com/Pvm0Cex45e
— Chainlink (@chainlink) September 28, 2022
SWIFT’s Strategy Director Jonathan Ehrenfeld Solé said that there’s been an “undeniable interest” in crypto from institutions. This was one of the reasons to work along with Chainlink on the CCIP project. Also, players in Traditional Finance (TradeFi) are seeking access to traditional and digital assets on the same network. Thus, they can swap across different asset classes swiftly.
As the crypto space matures, the demand for interoperability across asset classes has been surging in recent months. Over the last year, cross-chain capabilities have been the focus of numerous projects. This could be the next big development in the market for TradeFi investors.
Understanding the Working of CCIP
The Proof-of-Concept will utilize Chainlink’s Cross-Chain Interoperability Protocol (CCIP) while allowing SWIFT messages to instruct token transfers across every blockchain network.
Chainlink noted that this collaboration with SWIFT will allow financial institutions to gain blockchain capabilities without developing, replacing and integrating new connectivity into legacy systems. This would otherwise have required substantial modifications with an “exceptionally high” cost.
Connecting over 11,000 banks, SWIFT is currently the most widely used payment processing system. In August 2022, the system recorded an average of 44.8 million messages per day. However, transactions on the SWIFT network can take several days.
As a result, SWIFT is facing strong pressure to innovate itself amid the rising competition posed by other payment technologies. Thus, the company behind SWIFT is exploring DLT technology and blockchain. It is also reportedly working on building the infrastructure for central bank digital currencies (CBDCs) to facilitate faster payments.
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