The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has been closely monitoring the progress of fintech and its impact on its own operations. After exploring various projects involving new technologies, SWIFT has now thrown its support behind a unified ledger payment model.
In a post on its website, SWIFT revealed that it specifically investigated tokenization and the shared ledger model. It suggested that a common infrastructure could provide real-time balance updates for all participants in the shared ledger. However, SWIFT emphasized that messaging is still crucial for enabling frictionless transactions and additional services such as AML, compliance, sanctions screening, trade, and accounts receivable reconciliation.
Rather than developing a unified ledger from scratch, SWIFT proposed the creation of a state machine, which is a dynamic model reflecting the current state of transactions and balances across institutions. This state machine could be built on the existing ISO-20022 messaging technology already in use. It could be implemented on a blockchain or a centralized platform like SWIFT’s Transaction Manager.
The unified ledger model has gained traction among financial institutions, including the International Monetary Fund through its XC platform and participants of the Regulated Liability Network. The Bank for International Settlements has also endorsed this model.
After considering various alternatives, SWIFT, founded in 1973, settled on the unified ledger model. In 2022, SWIFT collaborated with fintech firm Symbiont on a pilot project to enhance information delivery to corporate clients using Symbiont’s blockchain-driven Assembly platform.
Interestingly, in a 2023 report, SWIFT advocated against the use of a unified ledger, instead favoring SWIFT as a “single point of access” to different blockchain networks.
It is worth noting that SWIFT plays a crucial role in enforcing economic sanctions worldwide. In February 2022, during the initial stages of the Russian invasion of Ukraine, the European Commission mandated the removal of an undisclosed number of Russian banks from the SWIFT network.
Overall, the adoption of a unified ledger model by SWIFT highlights the transformative potential of blockchain technology in the financial industry.