SWIFT, the global provider of secure financial messaging, plans to launch an innovative pilot program in the first quarter 2022. It will explore interoperability within the emerging asset tokenization market.
SWIFT allows you to test tokenized assets
Clearstream, Northern Trust and Citi-backed enterprise Blockchain firm SETL will also be participating in the initiative, according to a company announcement.
Thomas Zschach is SWIFT’s Chief innovation Officer. He said that the organization can link more than 11,000 institutions in 200 countries. This makes it strategically well placed to work closely with the future tokenized securities.
Zschach stated that they look forward to the new experiments and working with market participants to innovate on the emerging trend for tokenized assets.
According to SWIFT the experiments will use both Central Bank Digital Currencies, (CBDCs), as well as established forms, such as US Dollars, Euros, and other currencies.
Interest in Tokenized Assets Soar
SWIFT said that although tokenized assets’ market capitalization is small in comparison to cryptocurrencies, it is expected to rise to $24 trillion by 2027.
This is why the asset class is gaining more interest. Many financial instruments, such as stocks, bonds and other illiquid assets like commodities and real estate have been tokenized in recent years.
Banks and securities firms also have a stake in the tokenization hype. They are responding via fractionalization to tokenization. This is a process in which fractions of assets are sold to digital tokens to increase liquidity and accessibility.
The announcement stated that the experiment will focus on improving information exchange between participants and systems that interact with tokenized assets.
The report included excerpts that stated, “SWIFT plans to conduct a series of experiments during Q1 2022. It will leverage its trusted role of a central platform to examine the issuance (delivery versus payment (DVP), and redemption processes to support an frictionless and seamless tokenized assets market.”
The Cryptocurrency Threatens SWIFT’s Position
SWIFT connects financial institutions and banks to make cross-border payments.
There are concerns that SWIFT may lose its relevance as digital currencies like cryptocurrencies, CBDCs and stablecoins increase in popularity.
Yawar Shah (chairman of SWIFT) stated that cryptocurrencies have caused extraordinary changes in the global financial sector.
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