A visual representation of Bitcoin alongside U.S. dollar bills is shown in this illustration.
Global financial messaging network SWIFT has announced plans to test live transactions of digital currencies and tokenized assets next year. This marks a major move towards incorporating blockchain-based technologies into mainstream banking, though the process has been slow to gain wide market traction.
The concept of "tokenization" involves creating digital units, usually represented by blockchain-based tokens, for assets like bonds. Banks and asset managers hope this method will streamline trading by making transactions faster, cheaper, and more efficient, particularly by reducing the number of intermediaries. Despite its potential, tokenization has not yet made a significant impact on the broader financial market.
SWIFT, essential to global banking operations, has already been testing both central bank digital currencies (CBDCs) and tokenized assets. In March, it unveiled a platform designed to connect these CBDCs, which are still in development, to the existing financial system. The hope is that these digital versions of traditional currencies will enable seamless trading of tokenized assets, offering greater speed and efficiency.
Nick Kerigan, SWIFT’s head of innovation, said that the industry is now moving beyond the testing phase. The next step will be conducting real transactions where digital assets are traded and counterparties receive payment in actual money, though this will be done under controlled conditions. Kerigan noted that while the industry is beginning to embrace this technology, the market remains fragmented, and most initiatives have been limited to banks' internal systems.
Central banks are also testing the use of CBDCs for cross-border payments, but so far, these efforts have been confined to small, isolated groups. About 90% of central banks around the world are exploring CBDCs, seeing them as a way to keep pace with technological advances in cryptocurrencies like Bitcoin. SWIFT's latest initiative involves combining different types of digital assets across multiple platforms to facilitate smoother transactions.
Kerigan explained that successful trading and settlement of tokenized bonds require not just digital assets but also the cash component, which can be provided through a tokenized deposit or wholesale CBDC. Both elements—delivery of the asset and payment—are necessary for a complete transaction.
Though SWIFT's upcoming trials represent a significant step forward, the fragmented nature of the digital asset market continues to hinder widespread adoption. Still, as the integration of tokenized assets and digital currencies progresses, the financial industry may finally begin to see tangible benefits from these innovations.
