SWIFT Aims to Test Tokenization in 2022, Clearstream, Northern Trust, SETL to Participate

Since its inception, the Society for Worldwide Interbank Financial Telecommunication  has been closely studying blockchain technology and cryptocurrency. SWIFT, for instance, published a report on September 2020 that highlighted the fact that criminals prefer cash to money laundering, rather than using crypto for illicit transactions. SWIFT, despite being a year late, revealed in a blog posting published December 1 that it will be participating in an asset tokenization trial in 2022. The announcement states this:

Clearstream, Northern Trust and SETL are among the partners SWIFT is collaborating to plan experiments for Q1 2022 in order to see how it can help support interoperability during the development of the tokenised assets market.

SWIFT’s report highlights estimates that crypto assets could grow to $24 Trillion in 2027, according to SWIFT.

The SWIFT report contains many predictions and insights. According to some estimates by the organization, tokenized assets, stablecoins and crypto assets could reach volumes of approximately ’24 trillion USD by 2030. SWIFT knows that tokenized assets can be applied to almost anything, and can also be fractionalized. Tokenized assets, in essence, can increase liquidity and make these assets more accessible to people around the world who otherwise might not be able to access them.

“Tokenization,” SWIFT’s report notes. This can be used to stock and bond, but also to illiquid assets such as commodities, property, and even art. A share or bond that has a high unit value (say, $500) can be broken down into digital pieces. Each piece will have its own ownership and value. This allows a wider range of people to invest and increase the asset’s liquidity.

Plans for Q1 2022 will include research and leveraging tokenization of traditional assets, securities, or other market infrastructures. “SETL and Northern Trust will assist SWIFT and other participants in the integration of the different DLTenvironments, and with transaction orchestrations that use their respective capabilities. The SWIFT report states that the results of the experiments will be shared afterward with the financial community. Vikesh Patel (head of Securities Strategy at SWIFT) stated that the organization wants to create a frictionless and instant system.

Patel stated that his vision for instant and seamless transactions does not apply to traditional securities instruments, but also to new asset types. The insights gained from the exercise with top capital market participants will help us prioritize and define the concrete steps needed to allow seamless tokenised asset transactions.

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