Swift explores expansion of network into the digital asset market

Banking co-operative Swift is to explore how it can support interoperability in the development of the tokenised asset market, working in conjunction with Clearstream, Northern Trust, SETL and other market participants.

Relative to cryptocurrencies and stablecoins, the current market capitalisation of tokenised assets is small but momentum for these digital assets is expected to accelerate rapidly in the coming years. By some estimates, volumes could reach some $24 trillion by 2027.

Banks and securities firms are vying to tap into this nascent market by developing digital asset servicing capabilities, such as private key safekeeping and support for the full lifecycle of digital securities.

For its part, Swift is exploring how it can improve interoperability between participants and systems during the transactional lifecycle of tokenised assets. To this end, the Brussels-based messaging paltform plans a series of experiments in Q1 2022 on issuance, delivery versus payment (DVP), and redemption processes needed to support a seamless tokenised asset market.

These experiments will use both established forms of payment and central bank digital currencies (CBDCs), says Thomas Zschach, chief innovation officer, Swift.

“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,” says . “We look forward to this set of new experiments and innovating collaboratively with market participants on the emerging trend of tokenised assets.”

For the pilot programme, Clearstream and Northern Trust, alongside other industry players, will represent key parts of the tokenised − and traditional − asset ecosystem, including securities market infrastructures, local custodians and global custodians.

The tests will explore the feasibility and benefits of Swift as an interconnector, linking up multiple tokenisation platforms and various cash-leg payment types.

“Our vision for instant and frictionless transactions not only applies to traditional securities instruments but also to new asset classes as well,” adds Vikesh Patel, head of securities strategy, Swift. “The insights from this exercise with leading capital markets participants will help us define and prioritise the concrete steps required to enable seamless processes for tokenised assets.”