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SWIFT partners with Chainlink for cross-chain crypto transfer project

SWIFT partners with Chainlink for cross-chain crypto transfer project

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Interbank communication system SWIFT has partnered with Price Oracle provider Chainlink (LINK) to work on a proof-of-concept (POC) project that will allow traditional financial firms to trade between blockchain networks.

Chainlink co-founder Sergey Nazarov announced the project at his SmartCon 2022 conference in New York on September 28, together with SWIFT’s strategy director Jonathan Ehrenfeld Solé.

At the conference, Solé said that “institutional investors are undeniably interested in digital assets,” and these traditional financial players want access to digital and traditional assets from a single platform.

The POC leverages Chainlink’s Cross-Chain Interoperability Protocol (CCIP), which allows SWIFT messages to control token transfer across nearly all blockchain networks, which Nazarov says will accelerate the adoption of distributed ledger technology (DLT) blockchains in capital markets and traditional finance.

The interbank SWIFT messaging system is the most widely used platform for traditional cross-border fiat transactions, connecting more than 11,000 banks around the world. In August, the system recorded an average of 44.8 million messages per day.

However, transactions on SWIFT’s network can take several days to complete, and the company has also explored blockchain and DLT technology, as well as central bank digital currencies (CBDCs) to speed up payments.

Chainlink added that this collaboration with SWIFT will allow financial institutions to gain blockchain capability without replacing, developing and integrating new connections with legacy systems, which it says would require significant changes at “exceptionally high” costs.

Related: Why interoperability is the key to mass adoption of blockchain technology

Mastercard CEO Michael Miebach said at a panel session on CBDCs in May that he doesn’t expect SWIFT to exist in five years, likely due to increased competition from CBDCs for cross-border payments and settlements.

Mastercard later retracted the statement, pointing out that Miebach simply meant that SWIFT’s operation would continue to evolve from its current form.