Swift blockchain ledger requires key internal layers, Taurus co-founder warns

Swift blockchain ledger requires key internal layers, Taurus co-founder warns

Banks need their own permissioned ledger, wallet tools and smart-contract capabilities before they can use Swift’s tokenized-deposit network, Taurus’s Lamine Brahimi said.

Banks need their own permissioned ledgers, digital-asset wallets and tokenization and smart-contract capabilities to connect to Swift’s new blockchain-based ledger. Swift’s ledger enables round-the-clock, cross-border transfers of tokenized deposits but serves as an orchestration layer rather than a replacement for banks’ internal systems or existing settlement arrangements. HSBC, Standard Chartered, DBS and Citi have completed live transactions on the ledger, demonstrating payments that can settle in minutes, including on weekends.

Swift’s new blockchain-based ledger may be ready for live payments, but banks still need their own digital-asset infrastructure before they can connect to it, according to Lamine Brahimi, co-founder and managing partner of custody and tokenization firm Taurus.

“If you want to connect today to the Swift ledger, you need three things,” Brahimi said in an interview with CoinDesk. “You need your own permissioned ledger that interacts with that of Swift, you need wallet capabilities, and you also need tokenization and smart-contract capabilities to be able to integrate the Swift smart contracts.”

This criteria means Swift’s ledger is a replacement for a bank’s internal systems. It is an orchestration layer designed to enable institutions to move tokenized deposits across borders around the clock, while final settlement continues through existing arrangements. The banks still need systems to hold and manage tokenized deposits, digital asset wallets and smart contracts used in the process.

Swift said in July that 17 banks were preparing live tokenized-deposit transactions, signalling its first move to modernize its bank messaging system which has dominated the traditional financial sector since the 1970s. It presently still dominates money movements of up to $1.5 quadrillion a year.

HSBC and Standard Chartered completed the first live interbank transaction using Swift’s ledger in August. DBS and Citi later executed a weekend cross-border dollar payment in minutes, rather than up to two business days.

Brahimi said the extra technology is not necessarily a major hurdle for banks already issuing digital assets or managing digital assets nor does he believe it will hold Swift back from continuing to dominate its sector.

Brahimi said the need for additional infrastructure should not be read as a weakness in Swift’s design. The ledger is still an early-stage product, he said, but it gives banks a choice between existing payment rails and tokenized deposits that can move around the clock. “I think it’s a good move,” he said. “That provides the choice.”

Taurus recently announced its Swift integration in August. Brahimi said the firm provides the three required layers through one platform: a permissioned ledger, wallet-management tools and tokenization and smart-contract software. He said competitors may require banks to use multiple vendors for those functions.

The need for this infrastructure is also why tokenized deposits remain largely an institutional product. Banks have used internal tokenized-deposit systems for years, but moving money between institutions requires shared standards and compatible systems on both ends.

“Tokenized deposits until Swift’s announcement were barely used,” Brahimi said. “They were mostly used by huge banks like JPMorgan, because they had such a big global scale.”

Swift’s model keeps deposits on banks’ balance sheets, distinguishing them from stablecoins issued outside the banking system. Brahimi also said the ledger could give banks a standardized way to offer 24/7 payments without abandoning their existing infrastructure.

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