According to a press release on Thursday, recent trials using the interbank messaging system Swift and the Web3 services platform Chainlink successfully moved tokenized value across numerous private and public blockchains. In order to evaluate how they can interact with other blockchain networks, Chainlink and Swift declared in June that they will be working with dozens of financial institutions.
Swift worked together on the tests with BNP Paribas, BNY Mellon, The Depository Trust & Clearing Corporation, Lloyds Banking Group, and others. The press statement stated that the findings “have potential to remove significant friction slowing the growth of tokenized asset markets and enable them to scale globally as they mature.”
For tokenization to reach its potential, institutions will need to be able to seamlessly connect with the whole financial ecosystem. Our experiments have demonstrated clearly that existing secure and trusted Swift infrastructure can provide that central point of connectivity, removing a huge hurdle in the development of tokenization and unlocking its potential
Tom Zschach, chief innovation officer at Swift.
Asset tokenization is becoming a more popular experiment among financial organizations worldwide in an effort to enhance financial markets. Tokenization may assist increase efficiency and transparency in bond markets, according to a recent paper from the Hong Kong Monetary Authority. Even Christopher Waller, governor of the US Federal Reserve expressed his optimism towards the potential of tokenization.
Swift recently connected to various blockchains using Chainlink’s Cross-Chain Interoperability Protocol (CCIP). In July, Chainlink’s CCIP, which is intended to aid in the development of cross-chain applications and services, went operational. The necessity for regulatory clarity on tokenization was stressed in a report on the Chainlink and Swift projects, and it was said that future work will necessitate a stronger focus on data protection.
In March 2023 SWIFT announced positive findings from a pilot test of transfers between various central bank digital currencies (CBDCs). The agency is said to see “clear potential and value” in it as well.
The pilot test, according to sources, specifically examined how several CBDCs can cooperate through an API-based CBDC connector, using two distinct blockchain networks and current fiat-based payment systems. Application Programming Interface, or API, is a set of standards that describe how software or computers can connect with one another. APIs serve as a middle layer that handles data transfer between systems, sitting between an application and the web server.