SWIFT and Chainlink Collaboration: Tokenizing Assets for a Unified Blockchain Future

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The Society for Worldwide Interbank Financial Telecommunication (SWIFT) recently announced a collaboration between major banks and Web3 infrastructure provider Chainlink to trial connecting private and public permissionless blockchains. SWIFT, a global financial messaging system that underpins most international money and securities transfers, initiated tests in 2022 to explore the interoperability of private blockchains among financial institutions for tokenized assets. Now, it is expanding the scope of its experiments to encompass public blockchains by utilizing Chainlink’s Cross-Chain Interoperability Protocol (CCIP).

This collaboration includes major financial institutions across the globe, such as BNP Paribas, BNY Mellon, Citi, Euroclear, SIX Digital Exchange (SDX), and The Depository Trust & Clearing Corporation (DTCC). Chainlink is providing what SWIFT calls an “enterprise account abstraction layer.” Sergey Nazarov, one of Chainlink’s co-founders, believes that the asset tokenization trend is being embraced by banks and financial market infrastructure institutions alike, which has the potential to “10x the blockchain industry size.”

CCIP is a “universal messaging interface” for cross-blockchain communications. Its ability to interface with private blockchains, plus its security features like an active risk management network, make it appealing to major financial players, as it differentiates itself from alternatives like Axelar’s General Message Passing. CCIP uses the same security model as Chainlink’s oracle network, which has processed over seven trillion dollars in value.

SWIFT’s goal is to use existing bank systems while gaining the efficiencies that blockchain networks offer. Tom Zschach, chief innovation officer at SWIFT, envisions a multichain future, and connecting to hundreds of different chains is not feasible for most banks. Chainlink aims to save global banks time and money by linking chains through one integration. Nazarov explains, “What’s missing is the ability to send [assets] from a bank chain to a public chain — banks want to do that.”

The proof of concept will demonstrate how banks can practically interoperate across public and private networks. For instance, a bank can issue a security token on its own private chain using CCIP, then move the token to the chain of a custodian such as BNY Mellon. This enables a third bank to buy the tokenized security and transfer it to its own private chain. Nazarov believes that blockchains, both public and private, will eventually converge into a unified system, akin to the evolution of independent networks into the internet.

There are challenges to overcome as banks begin to adopt and adapt to using public chains. However, Nazarov asserts, “I think they realize the digital asset class is not going anywhere.”

Source: Blockworks

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