What will be the consequences of Blockchain integration in SWIFT’s system for global banking and for all cryptocurrencies? World experts commented to CoinTelegraph regarding the announcement of Wim Raymaekers, Head of Banking and Treasury Markets at SWIFT.
According to Raymaekers, the international provider of secure financial messaging services may integrate FinTech innovations, including Blockchain, to implement faster and transparent cross-border payments. International Business Times reports that SWIFT plans to launch this initiative early in 2016.
Wim Raymaekers said:
"We can look at changing correspondent banking settlements and maybe having blockchain technology rather than bilateral correspondent accounts."
Raymaekers mentioned that Blockchain technology can be used in various areas, such as securities, but he notes that this task is a strategic roadmap that banks have to develop. He advises banks to build it into their existing systems to maintain maximum compliance and control.
Building innovations into existing systems
CoinTelegraph decided to find out the possibilities for a future of such an initiative and asked leading Blockchain and Bitcoin specialists from all over the world: USA, China, UK, Greece, Italy, Canada, and India.
Andreas M. Antonopoulos, Security and Distributed Systems Expert, notes that SWIFT doesn’t have enough understanding of Blockchain technology and the open source of Bitcoin. He says:
“SWIFT has chosen the closed access, centralized, fragile, insecure, permissioned and less innovative alternate because they don't want to accept that we now live in a world where finance can be open access, open source, decentralized, global, robust, secure with permissionless innovation, like bitcoin is. They will waste countless millions following a dead end, while providing training for thousands of developers who will eventually move to work on the open systems. SWIFT has basically endorsed the design pattern of bitcoin while completely misunderstanding where its utility lies. So, a win for bitcoin.”
While Bobby Lee, chief executive officer of BTCC, is happy to see SWIFT’s interest in Blockchain but he cautions:
"Blockchain is a great technology, and I'm happy to see that SWIFT is also interested in it. However, I caution people to not get excited too quickly: bitcoin's blockchain is innovative and useful because it is decentralized: anyone can participate in the blockchain by using computer hashing power to confirm blocks. So unless their new blockchain solutions are open to everyone, they are nothing more than a private database, and are not an innovative use of the blockchain."
Manie Eagar, the CEO of DigiFin Institute and Director at Bitcoin Alliance Canada, reminded us about a number of consortia and lead financial institutions that have been quietly and rapidly prototyping the blockchain technology, with the bitcoin blockchain as the initial test bed:
“These range from permission to permissionless, and to private and public blockchain platforms and applications. Pretty much every sector and broad application is now under investigation, from IoT to interbank exchanges, remittances, and payment processing and settlements.
SWIFT very early on has expressed their interest, on behalf of their constituency, in blockchain as a tool to promote identity, security and compliance, and related governance and risk processes to secure and expedite payment between banks and in turn their customers globally.”
Manie Eagar mentioned that SWIFT has undertaken some prototyping and commissioned research and development earlier this year and the positive results must be spurring their further interest, investment and investigation.
“A number of major banks polled their knowledge under the R3 banner to support standards and distributed blockchain applications to help spur interest and development at a number of layers of the blockchain value chain. 2016 will see a number of these R&D processes bear fruit - in turn, drawing a number of fintech startups and investors.”
Adam Vaziri, Bitcoin lawyer and representative of UK Digital Currency Association said:
“I don't consider this groundbreaking; this is more about adapting to survive. Also, there is probably no better body to ensure the adoption of blockchain technology than SWIFT as they manage the payment pipes for the global banking system. It should be perfectly natural for them to instigate the use of shared ledgers by banks—a completely obvious step.”
According to Wim Raymaekers, “achieving nostro/vostro settlement between cross-border accounts involves a messaging layer and settlement lawyer.” Adam Vaziri commented:
“Looking ahead though: nostro and vostro accounts will be a thing of the past, and that too with correspondent banking. A bank in the future will issue a digital token to its customers for them to transact at a P2P level—no settlement, no correspondents. Future correspondents should act as redemption agents, who (via a protocol agreed upon amongst banks) will accept a bank’s credit token issued in exchange for local cash. SWIFT should build that protocol if it wants to future proof itself.”
Vishal Gupta, Founder of Bitcoin Alliance India, mentioned the positive sides of SWIFT’s initiative:
“It is exciting to learn that Swift wants to integrate blockchain technology into their system as early as 2016 and it is a huge endorsement of advantages of distributed ledgers on the blockchain at present. This could be the first step in bringing the global financial system under one common architecture, which will reduce both costs and time for consumers as well as banks.”
Luca Dordolo, the owner of the first Bitcoin ATM in Italy, also pointed out that banks began to realize that innovative technologies can overwhelm the old rules:
“I can register a new awareness and subsequent consciousness in the financial and banking world. As this awareness grows, banking systems are realizing they cannot lose time or the new transaction validation and ledger system called blockchain will overwhelm the old rules. The promise of faster cross border transactions is very tempting, but in my opinion it is not so simple to harmonize the SWIFT needs of transparency and trust among the few actors (banks) with the behavior of blockchain that is based on the largest platform of sharing information to obtain the same trust and transparency.”
Even though SWIFT hasn’t published the official statement of how they plan to implement modern financial technologies in their system, the statements from the Head of Banking and Treasury Markets at SWIFT speak about the growing interest of traditional financial institutions and organizations in Blockchain and Bitcoin.