On a recent episode of the Real Vision podcast, Chainlink co-founder Sergey Nazarov joined host Ash Bennington for a deep dive into a range of topics including Chainlink’s compatibility with legacy financial infrastructures and its ability to bridge the gap between traditional finance and DeFi through a single interoperability standard.
Chainlink’s work with Swift, the world’s biggest provider of secure financial messaging services, and the Depository Trust and Clearing Corporation (DTCC), a globally adopted financial market infrastructure, establishes how traditional financial institutions can interact with each other’s private chains and deliver the data needed to tokenize real-world assets onchain.
Last year, Swift successfully demonstrated how global financial institutions including Citi, BNY Mellon, and DTCC can transact with multiple blockchains using Chainlink’s Cross-Chain Interoperability Protocol (CCIP). The results indicate more than 11,000 Swift-connected banks throughout the world are ready to be blockchain-enabled participants in the tokenized asset space.
Nazarov explained why CCIP’s compatibility with existing infrastructures such as Swift, which has securely processed quadrillions of dollars in value over nearly 50 years, represents a huge leap forward in bringing banks onchain.
“Banks have two choices when it comes to adopting blockchains: one is throwing out all of their current systems; the other way is making their systems compatible with blockchains,” he said. “Banks don’t usually throw out systems, so the right approach is really compatibility.”
In May, DTCC collaborated with 10 of the world’s largest financial institutions to develop a chain-agnostic approach to delivering trusted, verifiable net asset value (NAV) data onto blockchains via CCIP. The results show how CCIP can unlock critical use cases such as tokenized funds.
“Fund tokenization is very important because the fund industry is where the majority of the financial system’s assets end up residing other than derivatives,” said Nazarov, who recently highlighted the launch of BlackRock’s first tokenized fund as a watershed moment for the digital asset economy.
“That whole industry is now in the process of becoming tokenized and the work with DTCC shows how valuable critical pieces of data can be placed onchain in order to operationally accelerate this tokenization.”
Ultimately, he believes the Swift proof of concept and DTCC pilot prove the world’s largest financial infrastructures are already in the process of adopting blockchain technology.
“These are the people that define how the financial system works and you see them adopting various blockchain technologies and looking how to implement them in order to allow their thousands of member banks, thousands of participating brokerages, banks, and other counterparties to interact efficiently,” he said.
Watch the full episode.