SWIFT, a banking cooperative company, plans to explore how it can support interoperability in developing the tokenised asset market. The firm has partnered with Clearstream, SETL, Northern Trust and other market players from the tokenised and traditional asset ecosystem to work on an innovative pilot program that aims to examine the delivery versus payment (DVP), issuance and redemption processes to support a seamless and frictionless tokenised asset market. The experiments will utilize both major methods of  payments  Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. Read this Term as well as central bank digital currencies.

The digital asset market is anticipated to grow rapidly, with its volumes expected to reach $24 trillion by 2027. In this regard, SWIFT wants to conduct multiple experiments together with market players (such as global custodians, local custodians, market infrastructures, securities firms and banks) to examine how they can enhance interoperability between firms operating in the market and systems during the transactional lifecycle of tokenised assets. One of the major risks in a world where traditional and tokenised assets exist together is developing various platforms, technologies and regulatory environments. SWIFT aims to ensure interoperability that interconnects market players and simplify their business operations by completing activities centrally that would otherwise be carried out bilaterally between institutions.

SWIFT will work with Clearstream, SETL, Northern Trust and other participants on the experiments to integrate the various DLT environments and use their PORTL suite of products to enable transaction orchestrations. PORTL offers a permissioned and robust toolset for financial institutions to develop applications that interoperate between existing infrastructures and various enterprise ledger technologies like DAML, Besu, Corda, Fabric as well as SETL’s high-performance ledger. The test will examine the benefits and feasibility of SWIFT as an interconnector that links up various types of cash-leg payments and multiple  tokenization  Tokenization Tokenization represents the process of substituting a sensitive data element with a non-sensitive equivalent, i.e. token, which bears no extrinsic or exploitable meaning or value. In essence, the rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset. For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one representing 0.05% of a piece of real estate.Tokenization has been described as the future of ownership. Some analysts believe that one day, tokenized systems will completely replace paper certification-based ownership systems. However, blockchain-based ownership records are not currently recognized as legally valid in most places in the world. Tokenization combined with blockchain is quite powerful, while also being useful in terms of PCI data security. When a token is issued on a blockchain, the blockchain records the issuance and maintains a ledger of every single movement of that token.A notable feature of blockchain with regards to tokens is that it controls for the double-spend issue. Prior to the innovation of blockchain, any digital asset such as an image, or document, could be copied an infinite number of times by anyone with access to it. Exploring Possibilities of Asset TokenizationBy overcoming the double-spend problem, blockchain can now facilitate the use of tokens that can be used in a similar way to casino chips or banknotes. This has opened up tokens as a vehicle for investment in multiple projects.Asset tokenization reflects the next evolution in tokenization. Tokenizing an asset involves issuing a digital token on a blockchain. As such, the token represents an underlying tangible or intangible asset. In this way, the economic value of the asset is conferred to the token. The ownership of the asset is represented by ownership of the token on the blockchain. Tokenization represents the process of substituting a sensitive data element with a non-sensitive equivalent, i.e. token, which bears no extrinsic or exploitable meaning or value. In essence, the rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset. For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one representing 0.05% of a piece of real estate.Tokenization has been described as the future of ownership. Some analysts believe that one day, tokenized systems will completely replace paper certification-based ownership systems. However, blockchain-based ownership records are not currently recognized as legally valid in most places in the world. Tokenization combined with blockchain is quite powerful, while also being useful in terms of PCI data security. When a token is issued on a blockchain, the blockchain records the issuance and maintains a ledger of every single movement of that token.A notable feature of blockchain with regards to tokens is that it controls for the double-spend issue. Prior to the innovation of blockchain, any digital asset such as an image, or document, could be copied an infinite number of times by anyone with access to it. Exploring Possibilities of Asset TokenizationBy overcoming the double-spend problem, blockchain can now facilitate the use of tokens that can be used in a similar way to casino chips or banknotes. This has opened up tokens as a vehicle for investment in multiple projects.Asset tokenization reflects the next evolution in tokenization. Tokenizing an asset involves issuing a digital token on a blockchain. As such, the token represents an underlying tangible or intangible asset. In this way, the economic value of the asset is conferred to the token. The ownership of the asset is represented by ownership of the token on the blockchain. Read this Term platforms.

Thomas Zschach, the Chief Innovation Officer at SWIFT, talked about the development: “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 tokenised assets.”

Digitalizing Capital Markets

The development by SWIFT comes at a time when digital assets are increasingly moving towards mainstream adoption across the world. From financial service providers and traditional banks to retail customers, digital assets are on the increase. Several of such assets are showing the potential of disrupting the financial market dominated by traditional players. While such assets have received widespread attention, large institutions are taking notice as 86% of the world’s central banks are examining the possibility of launching digital currencies.

Major banks are increasingly becoming exposed to cryptocurrencies. Citigroup recently started offering crypto trading and custody services. Banco Bilbao Vizcaya Argentaria (BBVA), Spain’s second-largest bank, recently launched a Bitcoin trading service for its private clients. Besides banks, payments firms like PayPal, Visa, and Mastercard are getting involved in crypto assets to offer to their customers. Infrastructure providers such as SWIFT and Accenture and others are trying to position themselves as potential carriers for digital assets like CBDCs. SWIFT thinks that it can play a role by connecting the digital assets ecosystem to the traditional financial world.