Swift banking cooperative is expected to explore the ways it can use to support interoperability in the development of the tokenized asset market. The firm is working in conjunction with SETL, Clearstream, Northern Trust, and several other market participants.
Relative to stablecoins and cryptos, the current market cap of tokenized assets is significantly small. However, the momentum for these digital assets is projected to accelerate quickly in the coming months and years. Some of the analysts estimate that the volumes might surge to levels of $24 trillion by 2027.
Securities firms and banks are aiming to tap into the budding market by creating digital asset servicing capabilities, including private key safekeeping and support for the entire lifecycle of digital securities.
On its part, Swift aims to enhance interoperability between the participants and the systems during the transactional lifecycle of the tokenized assets. In that context, the Brussels-based messaging platform wants to set up a series of experiments in Q1 2022 on the delivery versus payment (DVP), issuance, and redemption processes required to support a smooth tokenized asset market.
The tests will utilize both established forms of payment and the central bank digital currencies (CBDCs), according to the chief innovation officer, Swift, Thomas Zschach. He explained:
“As a neutral cooperative with a reach across 11,000 institutions in more than 200 countries, and oversight by central banks globally, Swift is uniquely placed to engage closely in the future of securities. We look forward to this set of new experiments and innovating collaboratively with market participants on the emerging trend of tokenized assets.”
For this test program, Clearstream and Northern Trust, and other industry players are set to represent critical parts of the tokenized and traditional asset ecosystem, including local custodians, securities market infrastructures, and global custodians.
These tests will also explore the feasibility and benefits of Swift as an interconnector that will link up many tokenization platforms and different cash-leg payment types. The head of securities strategy, Swift, Vikesh Patel, said:
“Our vision for instant and frictionless transactions not only applies to traditional securities instruments but also new asset classes as well. The insights from this exercise with leading capital markets participants will help us define and prioritize the concrete steps required to enable seamless processes for tokenized assets.”