The Society for Worldwide Interbank Financial Telecommunication (SWIFT), the longstanding giant of international payments, has cast a keen eye towards the burgeoning realm of financial technology (fintech). With a future-oriented perspective, SWIFT has proposed a novel approach to integrate itself within a tokenized financial landscape, potentially facilitated by a unified ledger system.

This proposition represents a significant shift for SWIFT, which has served as the cornerstone of international financial communication for decades. Their current system relies heavily on messaging protocols. However, recognizing the potential of tokenization and shared ledgers, SWIFT has expressed its desire to leverage its existing infrastructure to play a crucial role in this evolving financial ecosystem.

According to a recent announcement on their website, SWIFT has been meticulously evaluating the potential of tokenization and shared ledgers. They envision a common infrastructure that could provide real-time balance information for all participants within this shared ledger. However, SWIFT acknowledges the limitations of shared ledgers when dealing with vast amounts of data. The synchronization across numerous parties and the sheer computational power required present significant challenges. This, according to SWIFT, is where their established messaging layer steps in to bridge the gap.

"Shared ledgers," SWIFT contends, "are not ideally suited for the carriage and storage of high data volumes due to the inherent nature of data synchronization across participants and the substantial computing resources necessitated. This is precisely where a messaging layer becomes invaluable."

For a truly seamless transaction experience, SWIFT emphasizes the need to transfer additional data types. This facilitates the incorporation of value-added services such as Anti-Money Laundering (AML) compliance, adherence to regulatory frameworks, sanctions screening, and reconciliation processes for trade finance and accounts receivable.

Rather than embarking on the construction of a unified ledger from the ground up, SWIFT proposes the creation of a state machine. This dynamic model would function as a real-time reflection of the current state of transactions and account balances across various institutions. Furthermore, it could be built upon the existing ISO-20022 messaging technology that is already widely employed within the financial sector. This state machine could potentially operate on either a blockchain platform or a centralized system such as SWIFT's own Transaction Manager.

The concept of a unified ledger has garnered significant support within the financial domain. The International Monetary Fund (IMF) has embraced this technology through its XC platform, while numerous financial institutions are actively involved in the Regulated Liability Network (RLN) which utilizes a similar model. The Bank for International Settlements (BIS) has also voiced its endorsement for this approach.

SWIFT's decision to champion the unified ledger model is the culmination of a thorough evaluation process that considered various options. In 2022, they collaborated with Symbiont, a prominent fintech firm, on a pilot project. This initiative aimed to enhance the delivery of information to corporate clients by leveraging Symbiont's blockchain-powered Assembly platform.

Interestingly, SWIFT previously expressed reservations regarding the sole use of a unified ledger in a 2023 report. Their stance then favored the establishment of SWIFT as a single, unified access point for interacting with various blockchain networks.

It's important to note that SWIFT plays a vital role in enforcing economic sanctions around the globe. A recent example of this occurred in February 2022, at the outset of the Russian invasion of Ukraine. The European Commission mandated the removal of an undisclosed number of Russian banks from the SWIFT system.