Banks face three infrastructure hurdles for Swift blockchain ledger adoption

Traders Union
All News
Crypto
Swift blockchain hurdles for banks

Highlights

Banks need a permissioned ledger, digital-asset wallet capabilities, and tokenization and smart-contract functions to adopt Swift’s blockchain-based ledger.
Seventeen banks prepared live tokenized-deposit transactions on Swift as of July, with HSBC and Standard Chartered completing the first live interbank transaction in August.
The infrastructure burden limits tokenized deposits to institutional banks, allowing firms like JPMorgan to deploy at scale while enabling 24/7 payments with on-balance-sheet assets.

Infrastructure requirements for Swift connectivity

As first reported by CoinDesk, Taurus co-founder and managing partner Lamine Brahimi says banks need three technical components to connect to Swift’s new blockchain-based ledger, a permissioned ledger, digital-asset wallet capabilities, and tokenization and smart-contract functions.

In an interview, Brahimi says these elements are necessary for banks to issue, manage and hold tokenized deposits that can interact with Swift’s network. He says Swift’s ledger supports cross-border transfers of tokenized deposits around the clock, but does not replace banks’ internal systems or existing final-settlement arrangements.

That means lenders still need technology to manage tokenized deposit balances and operate the smart contracts used in the process. Brahimi says this should not be seen as a flaw in Swift’s design, describing the ledger as an early-stage product that gives banks the option to use tokenized deposits alongside existing payment rails.

Implications for banks and tokenized payments

Swift said in July that 17 banks were preparing live tokenized-deposit transactions, marking a further push to modernize the messaging network that has underpinned much of global banking since the 1970s. HSBC and Standard Chartered completed the first live interbank transaction on the ledger in August, while DBS and Citi later carried out a weekend cross-border U.S. dollar payment in minutes instead of up to two business days.

Brahimi says the extra technology may not be a major obstacle for banks that already issue or manage digital assets, and he does not expect it to slow Swift’s position in cross-border finance. He also says the infrastructure burden helps explain why tokenized deposits remain largely an institutional product, with large banks such as JPMorgan better placed to deploy them at scale.

Taurus announced its own Swift integration in August, and Brahimi says the firm offers the required ledger, wallet-management and tokenization software through a single platform. He contrasts that with rivals that may require banks to assemble multiple vendors, while arguing Swift’s model could help banks offer 24/7 payments without moving deposits off their balance sheets, unlike stablecoins issued outside the banking system.

Our earlier article on Malaysian bank stocks falling amid rising long-term bond yields explained how higher yields can pressure banks’ capital positions by driving down the value of securities held on their balance sheets. It also noted that analyst downgrades and expectations of weaker quarterly performance added to the negative sentiment, with concerns extending to funding costs and corporate issuance conditions.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.