SWIFT Offers Universal Ledger Model for Digital Assets

SWIFT proposes a universal shared ledger to improve the way digital payments and assets are recorded and enhance coordination between different market participants. The new system will use an ISO-20022 messaging layer based on SWIFT’s Transaction Manager as a single point of access to various blockchain networks.

SWIFT analysts proposed a new concept for a shared ledger that would potentially modernize the existing system for keeping records of digital asset transactions. Specifically, they suggest using the SWIFT infrastructure as a single point of access to various blockchain networks.

SWIFT analysts pointed out that the need to introduce the concept of a shared ledger for digital assets is undeniable, as there’s currently no system capable of combining fragmented information about transactions. A shared ledger will enable to:

• reduce risks and costs in the market;
• provide instantaneous movement of value and atomic settlement for DvP and PvP transactions;
• minimize the need for reconciliation between financial institutions;
• build additional services on top of the shared platform, extending its functionality and appeal to users;
• improve the speed, predictability, and accessibility of cross-border payments and reduce fee costs.

The Transaction Manager service from SWIFT, based on ISO-20022 messaging technology, is proposed as a point capable of uniting financial institutions in a shared network, providing a reliable level of messaging. A shared ledger will become universal for most financial institutions, which will be able to use it as an accounting mechanism. The system based on it will enable the registration of balance sheet information, as well as confirm and record settlements. Basically, SWIFT offers an opportunity to be a link for transferring data on digital asset transactions, which are stored on the balance sheets of various institutions across different financial networks.

It’s worth noting that the concept of a shared ledger is being actively discussed and studied by various regulators and financial market participants over the past few years. To wit:

1. The BIS analysts mentioned the initiative in their 2023 annual economic report, in which the regulator described a shared ledger as a new type of possible financial market infrastructure.
2. The Monetary Authority of Singapore (MAS) announced the launch of the Global Layer One (GL1) initiative, aimed at facilitating cross-border transactions using open digital infrastructure.
3. The New York Innovation Center (NYIC) of the Federal Reserve Bank of New York is exploring a unified payment system, known as a Regulated Liabilities Network (RLN).
4. Citigroup is also testing the RLN infrastructure to tokenize commercial cash.
5. The initiative of the International Monetary Fund (IMF) to optimize cross-border payments on the basis of X-C platform uses the concept of a shared ledger as a basis.

SWIFT is actively exploring the compatibility of different blockchain networks within its infrastructure and developing technical solutions for cross-border payments in CBDCs.

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