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SWIFT-Chainlink Experiment Proves A Success
The experiments show the role that CeFi may have to play in the use of tokenized assets in the future.
In a first for the DeFi industry, global financial messaging network Swift has unveiled the results of a series of experiments showcasing their capacity to effortlessly facilitate the transfer of tokenized assets across various public and private blockchains. These findings hold the potential to alleviate a significant bottleneck that has hampered the growth of tokenized asset markets, enabling global scalability as these markets mature.
Tokenization: The Next Frontier
Although tokenization is still in its early stages, some 97% of institutional investors believe it will revolutionize asset management and become a driving force within the industry. Their optimism stems from tokenization's ability to boost efficiency, slash costs, and, notably, enable fractional ownership, making investments more accessible to a broader audience.
However, a significant challenge that both investors and institutions face is the fragmented nature of tokenized assets. These assets are hosted on different blockchains, each with its unique functionality and liquidity characteristics. The critical need for interoperability between these blockchains cannot be overstated. Without it, financial institutions must build custom connections to each platform, leading to substantial operational hurdles and expenses.
Swift's Strategic Leap
In collaboration with over a dozen major financial institutions and Web3 interoperability platform Chainlink, Swift has successfully demonstrated its ability to offer a single access point to multiple networks using its existing, secure infrastructure. This achievement dramatically reduces operational complexities and the investments required for institutions to actively support the development of tokenized assets.
The experiments form a part of Swift's broader strategy to ensure secure global interoperability as new technologies and platforms emerge. They build upon the groundwork laid in recent years, showcasing how Swift's infrastructure can facilitate the interconnection of Central Bank Digital Currencies (CBDCs) and other digital assets with both new and existing payment systems.
Tom Zschach, Chief Innovation Officer at Swift, commented: "Interoperability is at the heart of everything we are doing at Swift to facilitate the seamless flow of value across the world in the face of increasing fragmentation. For tokenisation 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 tokenisation and unlocking its potential."
The Experiment in Detail
Swift joined forces with several prominent financial institutions to conduct its experiments, including ANZ, BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX), and The Depository Trust & Clearing Corporation. Chainlink played a pivotal role as an enterprise abstraction layer, securely connecting the Swift network to the Ethereum Sepolia network. Chainlink's Cross-Chain Interoperability Protocol (CCIP) facilitated seamless interoperability between the source and destination blockchains.
Beyond demonstrating that Swift's existing infrastructure can provide a secure, scalable solution for financial institutions to connect to diverse blockchains, the experiments also delved into the technical and business prerequisites for engaging with both public and business blockchains. They explored the significance of a blockchain interoperability protocol in securely transmitting data between existing systems and a potentially limitless number of blockchains.
Simulated transfers of tokenized assets were conducted, including transfers between two wallets on the same public Distributed Ledger Technology network, between two wallets on different public blockchains, and between a public and private blockchain network.
Swift will continue to work with the financial sector to pinpoint the most concrete use cases for tokenized asset adoption. The immediate focus is expected to be on secondary trading in non-listed assets and private markets.
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