Summary
TLDR: SWIFT is a centralized financial messaging network connecting banks globally, but recent exclusions have led to competition from China and others. Blockchain technology offers potential to enhance financial efficiency by reducing reliance on intermediaries, but interoperability challenges remain. SWIFT’s experiments with blockchain and tokenization show promise in reducing inefficiencies caused by intermediaries. Institutional adoption of blockchain technology is growing, with a focus on interoperability and automation to provide cheaper and faster transactions.
Key Points
1. The need for an organization connecting all banks is clear in today’s hyper-globalized economy where funds, goods and services are sent across every corner of the globe.
2. SWIFT (Society for Worldwide Interbank Financial Telecommunication) was established in 1973 as a member-owned messaging network for financial institutions to send secure communications and settle inter-bank transactions, connecting more than 11 thousand financial institutions across 200 countries and territories.
3. The exclusion of sanctioned Iranian and Russian banks from SWIFT has prompted the launch of competing alternative intermediaries by China and other nations, leading to a rethinking of how international finance is structured.