Swift’s new blockchain-based ledger is set to facilitate live payments, yet banks must develop their own digital asset infrastructures to connect efficiently. Lamine Brahimi, co-founder of Taurus, a custody and tokenization firm, emphasized that merely accessing the Swift network would not suffice for banks; they would need additional technical frameworks.
Three Essential Requirements for Banks
According to Brahimi, banks aiming to join Swift’s tokenized deposit network must prepare three main elements: a permissioned ledger compatible with Swift’s system, digital asset wallet capabilities, and tools for tokenization and smart contracts. Taurus, a fintech company, offers institutional clients services in digital asset custody, tokenization, and infrastructure.
Banks today seeking to connect with the Swift ledger require a permissioned ledger, wallet infrastructure, and tokenization tools compatible with Swift’s smart contracts.
This structure underscores that Swift’s new ledger doesn’t replace banks’ existing internal systems. Instead, it functions as an additional layer, facilitating cross-border tokenized deposit transfers around the clock. Final settlements continue to rely on existing regulations and entrenched financial infrastructure.
Live Transactions Underway
In July, Swift announced that 17 banks were preparing for live tokenized deposit transactions. This move marked a significant step in modernizing the traditional messaging infrastructure that has been dominant since the 1970s. Swift’s network currently facilitates up to $1.5 quadrillion in monetary movements annually.
In August, HSBC and Standard Chartered completed the first live interbank transaction using Swift’s new ledger. Subsequently, DBS and Citi executed cross-border dollar payments over a weekend within minutes, demonstrating a clear advantage in speed compared to traditional methods, which can take up to two business days.
The new ledger offers banks the option of tokenized deposits that can move around the clock alongside existing payment channels.
Swift’s Role and System Constraints
Brahimi believes that additional technological requirements may not pose a significant barrier for banks already engaged in digital asset issuance or operations. He argues these needs should not be seen as a flaw in Swift’s design. Although the system is in its early stages, it allows banks to offer 24/7 payment services without completely abandoning their existing infrastructure.
In August, Taurus announced its integration with Swift. Brahimi noted that the company provides the necessary three layers within a single platform, while other solutions might require banks to work with multiple providers for these functionalities.
Why Tokenized Deposits Remain in Institutional Hands
The need for additional infrastructure elucidates why tokenized deposits have predominantly remained in institutional usage. Banks have been utilizing tokenized deposit solutions within their internal systems for years. However, standardized protocols and compatible systems on both sides are essential for inter-institutional money transfers.
Before Swift’s announcement, Brahimi remarked, the use of tokenized deposits was highly limited, primarily dominated by large global banks such as JPMorgan. Swift’s model keeps the deposits on the banks’ balance sheets, distinguishing itself from stablecoin structures outside the banking system.
