Key Takeaways:
- SWIFT is testing blockchain-based onchain messaging and a stablecoin-like settlement token with Linea.
- More than a dozen major banks, including BNP Paribas and BNY Mellon, are part of the pilot.
- The project could reshape global payments by replacing legacy systems with faster, cheaper blockchain rails.
SWIFT, the backbone of global interbank communication, is taking a major step into blockchain. The financial messaging giant has partnered with Linea, an Ethereum Layer 2 network developed by Consensys, to test onchain messaging and a new stablecoin-style settlement instrument. With over 11,000 financial institutions depending on SWIFT’s current infrastructure, this shift signals one of the most ambitious blockchain experiments in traditional finance to date.
Over the decades, SWIFT has been the prevailing network of sending safe interbank messages. Its system handles an estimated 7 trillion transactions in a single day but critics have always referred to it as outmoded, very slow, expensive and overly reliant on intermediaries.
SWIFT seeks to simplify the settlement and reduce costs through innovation with blockchain to improve transparency. A source close to the pilot described the initiative as “a technological transformation for the international payments industry that will take months to develop but carries long-term systemic impact.”
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Linea: Privacy and Scale for Institutional Finance
Why Linea Was Chosen
SWIFT chose Linea due to the privacy and scalability it offered. Built as an Ethereum Layer 2 using zk-rollup and zkEVM technology, Linea enables faster transactions with lower fees while maintaining compatibility with Ethereum applications.
In the case of banks, privacy is not a compromise. With its state-of-the-art cryptographic demonstrations, sensitive financial information can be kept safe and yet also permit operations inside the blockchain to be compliance-friendly. This is the balance that big institutions are afraid of implementing a public blockchain network.
A Direct Challenge to Ripple
Ripple has been years in the process of positioning itself as a more fast, blockchain-based alternative to SWIFT when it comes to cross-border payments. Its settlement system and XRP token have attracted the interest of banks who want to gain efficiency.
However, this time the blockchain experiment of SWIFT poses a threat in countering the competitive advantage of Ripple. SWIFT can provide the same pace and cost benefits by creating its own onchain infrastructure in collaboration with trusted banking giants, and does not need to impose a move to a brand-new network on the institution.
This, according to analysts, may hamper the institutional attractiveness of Ripple. The pilot by SWIFT also proposes a stablecoin-like settlement coin, going beyond mere messaging to the direct transfer of value, which Ripple has historically ruled.
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Stablecoin-Style Settlement: A New Layer of Innovation
The most striking element of the pilot is SWIFT’s exploration of a stablecoin-like interbank settlement token. While details remain under development, the concept involves allowing banks to settle obligations directly onchain in near real time, bypassing layers of reconciliation that currently slow global transactions.
If successful, this move would transform SWIFT from a pure messaging service into an integrated payments network that directly handles value transfer. It is also an expression of a larger industry trend, with institutions seeing tokenized money and stablecoins as a vital part of the finance of the future.
Industry Reactions and Wider Implications
More than a dozen major financial institutions are already included in the pilot, such as BNP Paribas and BNY Mellon. The presence of such heavy weights sends the message of the seriousness with which the banking sector is approaching the issue of blockchain adoption.
Observers in the industry observe that in case the pilot of SWIFT is successful, it will speed up regulatory transparency on settlements centered on blockchain. The pivot provided by SWIFT could also be viewed by governments and central banks as an opportunity to adopt distributed ledger technology without transferring control over it to a privately-operating crypto network.
Meanwhile, rivals such as Ripple and Stellar might experience pressure increasing when banks will maintain using SWIFT, which is already an incumbent, trusted by banks.
The project is still in its early development phase, with several months of testing and evaluation ahead. SWIFT has not committed to a specific launch timeline but has signaled that blockchain will be a long-term priority.
Source: https://www.cryptoninjas.net/news/swift-teams-with-linea-on-blockchain-messaging-and-stablecoin-pilot-involving-7-trillion-network/
