In a website post today, Swift embraces the concepts of tokenization and a shared ledger, which could replace the need for messaging between financial institutions. Swift currently operates the global messaging layer, which a shared ledger could eventually render extinct.
It initially argues that in addition to a shared ledger for payments, there’s a requirement to store rich data such as that needed for anti money laundering (AML). Ideally that data would be communicated through messaging. It then proposes that the shared ledger could be based on an adapted version of its centralized Swift transaction manager.
While many of Swift’s points are perfectly valid, in our view, this demonstrates the classic conundrum of how incumbents respond to innovation. Swift could make sense as the operator of some of these shared ledgers. Likewise, incumbent central depositories (CSDs) might be the logical operators for securities ledgers.
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