Key Takeaways
- Payment-focused blockchains are often pitched as a better alternative to the SWIFT-based system.
- However, SWIFT itself is increasingly committed to blockchain solutions.
- SWIFT’s latest project will prototype an open ledger that supports whatever tokenized assets banks require.
For years, blockchains like Stellar and Ripple’s XRP Ledger have been positioned as faster, more efficient alternatives to the SWIFT network. But these platforms have never really eaten into SWIFT’s dominant market share of cross-border payments.
Now, with SWIFT developing its own prototype blockchain ledger in partnership with ConsenSys, upstart digital challengers are on the back foot. Seeking to reassure investors and downplay the consequences of SWIFT’s announcement, however, Ripple CEO Brad Garlinghouse dismissed the project as a little more marketing stunt.
Blockchain’s Challenge to SWIFT
The notion that blockchains could challenge SWIFT’s hold on global interbank payments is most closely aligned with Ripple.
In a 2020 blog post, Ripple Labs board member Asheesh Birla summed up this argument succinctly.
“Blockchain technology allows businesses and financial institutions to transact and accept payments directly, eliminating the need for a “middleman” like SWIFT,” he wrote.
CEO Brad Garlinghouse was even more bold. “What we’re doing and executing on a day-by-day basis is, in fact, taking over SWIFT,” he said in 2018.
In a similar vein, Stellar dedicates an entire section of its website to SWIFT’s inefficiencies, concluding that the incumbent payment network’s time is nearly up, and that a faster, cheaper blockchain solution should replace it.
SWIFT’s Blockchain Journey
In today’s world, most consumers expect money to move at the speed of the internet. To meet this demand, fintech startups now offer a range of cross-border payment rails that settle in minutes, or even quicker.
Against this backdrop, the organization has moved to upgrade its standards and infrastructure, for example, by integrating faster, 24/7 domestic systems like FedNow into its global network. Nevertheless, it can still take up to five business days to process a SWIFT transfer.
Behind the scenes, however, SWIFT’s innovation labs have quietly been working away at their own blockchain solutions that might one day connect to nearly every bank in the world.
Since at least 2022, SWIFT has been exploring how central bank digital currencies (CBDCs) and tokenized assets could be integrated into existing financial infrastructures.
A clearer picture of these efforts has emerged this year. Working alongside central and commercial banks, SWIFT has increasingly positioned itself as an intermediary that connects banks and emerging blockchain platforms.
This new role is continuous with what SWIFT has always been—a common messaging standard that enables interoperability between different systems, rather than a payment processor in its own right.
New Blockchain to Power Real-Time Payments
For SWIFT’s latest foray into blockchain, announced on Monday, Sept. 29, the organization is prototyping an open ledger that will facilitate the movement of tokenized value across diverse platforms.
“The types of tokens that will be exchanged on the ledger is the territory of commercial and central banks,” SWIFT will simply provide the means of interoperability, a statement said.
Speaking at TOKEN2049 on Thursday, Oct. 2, ConsenSys CEO Joe Lubin confirmed that the new platform would be deployed on Linea, an Ethereum layer 2 network.
The prototype is being pitched as a 24/7, real-time settlement rail.
Meanwhile, SWIFT’s traditional infrastructure is getting its own blockchain makeover. Thanks to a partnership with Chainlink, banks may soon be able to manage digital asset flows using the same universal framework that connects the SWIFT network.
Ripple’s Garlinghouse Responds
With the range of stablecoins, CBDCs, and tokenized deposits expanding everyday, not to mention alternative blockchain rails like Ripple, Birla’s vision of a global payment system without middle men looks increasingly far-fetched.
Far from replacing the incumbent, platforms like Ripple and Stellar helped create the fragmentation that could redefine SWIFT’s mission in the blockchain era.
However, Ripple CEO Brad Garlinghouse has sought to downplay the threat posed by SWIFT’s blockchain turn.
“It’s true. In the early days, we did use SWIFT as a major competitor,” Garlinghouse said in a message to investors. He went on to dismiss the new blockchain prototype as a “marketing play […] rather than an actual meaningful product announcement.”
“But the reality is, in the time its taken for them to announce a prototype, we’ve been building robust digital asset infrastructure, expanding from our payments product to custody, stablecoins, development on the XRP Ledger, and more,” Garlinghouse emphasized.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
