SWIFT Throws Support Behind Unified Ledger Payment Model amid Fintech Innovations
Summary:
SWIFT, the global banking communication network, supports a unified ledger payment model after exploring various innovative technologies. They proposed creating a "state machine" for real-time tracking of transactions and balances across financial institutions, that could function on either a blockchain or a centralized platform. This shift towards unified ledger technology has also been adopted by organizations like the International Monetary Fund and the Bank for International Settlements.
The International Banking Communication Network (SWIFT) has its eye on fintech progression, contemplating its future significance. The organization, a foundational element of the present international transactions system, has enthusiastically adopted a harmonized ledger payment model after experimenting with multiple innovative technologies. According to SWIFT's web news, the main focus was on the shared ledger model and tokenization. The advantage, they mentioned, would be that all participants on the shared ledger would be able to verify their balances in real-time. However, SWIFT promptly clarified that this doesn't eliminate the necessity for a messaging functionality in the process.
They mentioned that shared ledgers aren't capable of managing or retaining high data volumes due to the complexity of data synchronization between parties and the computational demands. Therefore, a messaging platform becomes essential. SWIFT added, to achieve transaction smoothness, moving additional types of data is necessary. This will facilitate extra services like AML, compliance, trade, sanctions screening, and accounts receivable reconciliation.
Rather than launching a new unified ledger, SWIFT proposed the concept of a "state machine" - a dynamic model mirroring the real-time state of transactions and balances across institutions. This can be built upon the ISO-20022 messaging technology already in operation. It has the potential to function on a blockchain or on a centralized platform such as SWIFT’s Transaction Manager.
The concept of unified ledger technology has also been supported by the International Monetary Fund on its XC platform, and by financial institutions partaking in the Regulated Liability Network. The Bank for International Settlements has also given this model its approval.
Established in 1973, SWIFT decided on the unified ledger model after evaluating numerous alternatives. In 2022, it partnered with fintech Symbiont in an effort to upgrade its information delivery to corporate clients via Symbiont's blockchain-based Assembly platform. Interestingly, SWIFT had previously argued against using a unified ledger in a 2023 report, supporting SWIFT as the sole access point to varied blockchain networks. Being a crucial player in the enforcement of international economic sanctions, SWIFT removed several unnamed Russian banks following a directive by the European Commission amidst the Russian invasion of Ukraine in February 2022.
Published At
3/22/2024 9:07:00 PM
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