Swift Explores Possibilities to Experiment with Tokenized Assets Next Year

Global Interbank Messaging network, Swift has announced its plans to experiment with tokenized assets in the first quarter of 2022. According to reports, it is currently exploring possibilities to improve and enable interoperability between participants and systems in the time of transactional lifecycle of tokenized assets. Swift is currently studying the issuance, redemption processes, and delivery versus payment to conclude its effort of contributing to a frictionless and seamless tokenized market.

The report discloses that the experiment will involve the mode of payment and the Central Bank Digital Currencies (CBDCs). The volume of digital assets has been predicted to hit $24 trillion by 2027. Though the market capitalization of tokenized assets is large, there is a huge expectation that digital assets could accelerate massively in the future. Currently, Swift, Northern Trust, SETL, Clearstream, and other participants are studying Swift’s feasibility and benefits as an interconnector.

Swift is seeking to support both traditional and tokenized asset flow. For now, they will focus on only the regulated assets. They will basically connect all entities and ensure that customers provide better services to the users at the receiving end. This means Swift will not perform direct settlement of tokenized assets nor will they become crypto custodians as stated in their report.

The report further discloses that Clearstream and other participants will represent the key parts of the tokenized and the traditional asset ecosystem. According to Thomas Zschach, Chief Innovation Officer at Swift, Swift is strategically positioned to get involved in the future of securities.  He said:

“As a neutral cooperative with a reach across 11,000 institutions in more than 200 countries, and oversight by central banks globally, SWIFT is uniquely placed to engage closely in the future of securities. We look forward to this set of new experiments and innovating collaboratively with market participants on the emerging trend of tokenized assets.”

The integration that is supposed to happen between the DLT environment and the various transactions via their respective transactions would be supported by the Northern Trust and the SETL. Anthony Culligan, Chief Engineer at SETL has also lauded their involvement in this innovation. According to him, there is a significant innovation in securities tokenization. For this reason, this experiment has what it takes to create broader accessibility and interoperability among the emerging networks.

Vikesh Patel, Head of Securities Strategy, SWIFT also believes that the experiment will define important steps for the tokenized assets. “Our vision for instant and frictionless transactions not only applies to traditional securities instruments but also new asset classes as well. The insights from this exercise with leading capital markets participants will help us define and prioritize the concrete steps required to enable seamless processes for tokenized assets,” said the executive.