On a recent episode of the What the FinTech? podcast, Swift’s Innovation Manager, Jack Pouderoyen, joined host Paul Hindle to talk about Swift’s approach to tokenization and its successful proof of concept (PoC) demonstrating how banks can interact with blockchains using their existing infrastructure and Chainlink’s Cross-Chain Interoperability Protocol (CCIP).
Swift is the biggest provider of secure financial messaging services connecting over 11,500 banks and market infrastructure providers in more than 200 countries and territories around the world. More than a dozen top financial institutions, including Citi, BNY Mellon, and DTCC, collaborated with Swift to develop how entities can transact with a variety of public and private blockchains using CCIP and Swift’s private key infrastructure (PKI).
The results demonstrated how CCIP helps banks overcome one of the biggest hurdles on the path toward adopting blockchain technology and tokenization: interoperability.
Pouderoyen said one of the key challenges traditional financial institutions face is understanding which of an ever-growing myriad of blockchains they should invest in connecting to.
“We heard a lot of questions from our institutions saying, ‘We have all this massive investment built up in Swift; how can we leverage that to start to access these ecosystems?’”
CCIP provides a single standard for securely connecting with virtually any blockchain – be it a private bank chain or a public DeFi application. Pouderoyen said the results of the CCIP PoC illuminated “a much quicker path” toward tokenized asset adoption.
He described blockchain interoperability – between different networks as well as between blockchains and legacy financial infrastructure – as one of the financial industry’s marquee challenges.
“When we think about it for all the alleged benefits that tokenization and blockchains can bring to the financial market – if it’s inherently built in a kind of a fragmented way, then liquidity will be trapped across different types of platforms and liquidity across the market will suffer as a result,” he explained.
By allowing digital assets to flow freely between private bank chains and public DeFi applications, CCIP empowers traditional financial institutions like Euroclear and ANZ to unlock exciting new use cases for tokenized real-world assets. Because tokenized assets confer new opportunities such as fractionalization and programmability, the space is projected to reach or exceed $10 trillion by 2030.
“Asset tokenization in particular as a trend has picked up speed over the past couple of years and it just continues to be a hot topic within the financial industry,” Pouderoyen said. “From the conversations we’re having, it’s clear that there’s an increasing focus and desire to move past pure experimentation and proofs of concept and really starting to get into actual use cases and business cases.”
Listen to the full episode.